Correlation Between Microsoft and Lotus Retail
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lotus Retail at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and Lotus Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lotus Retail Growth, you can compare the effects of market volatilities on Microsoft and Lotus Retail and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of Lotus Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lotus Retail.
Diversification Opportunities for Microsoft and Lotus Retail
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Lotus is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lotus Retail Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Retail Growth and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with Lotus Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Retail Growth has no effect on the direction of Microsoft i.e., Microsoft and Lotus Retail go up and down completely randomly.
Pair Corralation between Microsoft and Lotus Retail
Given the investment horizon of 90 days Microsoft is expected to generate 1.17 times more return on investment than Lotus Retail. However, Microsoft is 1.17 times more volatile than Lotus Retail Growth. It trades about 0.08 of its potential returns per unit of risk. Lotus Retail Growth is currently generating about 0.03 per unit of risk. If you would invest 24,843 in Microsoft on September 2, 2024 and sell it today you would earn a total of 17,503 from holding Microsoft or generate 70.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.97% |
| Values | Daily Returns |
Microsoft vs. Lotus Retail Growth
Performance |
| Timeline |
| Microsoft |
| Lotus Retail Growth |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and Lotus Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lotus Retail
The main advantage of trading using opposite Microsoft and Lotus Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lotus Retail can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lotus Retail will offset losses from the drop in Lotus Retail's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Lotus Retail vs. CPN Retail Growth | Lotus Retail vs. Ticon Freehold and | Lotus Retail vs. WHA Premium Growth | Lotus Retail vs. Major Cineplex Lifestyle |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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