Correlation Between Microsoft and Lasertec
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lasertec 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 Lasertec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lasertec, you can compare the effects of market volatilities on Microsoft and Lasertec 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 Lasertec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lasertec.
Diversification Opportunities for Microsoft and Lasertec
Good diversification
The 3 months correlation between Microsoft and Lasertec is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lasertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lasertec 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 Lasertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lasertec has no effect on the direction of Microsoft i.e., Microsoft and Lasertec go up and down completely randomly.
Pair Corralation between Microsoft and Lasertec
Given the investment horizon of 90 days Microsoft is expected to generate 0.5 times more return on investment than Lasertec. However, Microsoft is 2.0 times less risky than Lasertec. It trades about -0.03 of its potential returns per unit of risk. Lasertec is currently generating about -0.25 per unit of risk. If you would invest 42,375 in Microsoft on August 24, 2024 and sell it today you would lose (675.00) from holding Microsoft or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Lasertec
Performance |
| Timeline |
| Microsoft |
| Lasertec |
Microsoft and Lasertec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lasertec
The main advantage of trading using opposite Microsoft and Lasertec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lasertec 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 Lasertec will offset losses from the drop in Lasertec's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Lasertec vs. Sumco Corp ADR | Lasertec vs. Asm Pacific Technology | Lasertec vs. Tokyo Electron | Lasertec vs. Advantest |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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