Correlation Between Microsoft and Lsv Small
Can any of the company-specific risk be diversified away by investing in both Microsoft and Lsv Small 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 Lsv Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Lsv Small Cap, you can compare the effects of market volatilities on Microsoft and Lsv Small 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 Lsv Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lsv Small.
Diversification Opportunities for Microsoft and Lsv Small
Average diversification
The 3 months correlation between Microsoft and Lsv is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lsv Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsv Small Cap 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 Lsv Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsv Small Cap has no effect on the direction of Microsoft i.e., Microsoft and Lsv Small go up and down completely randomly.
Pair Corralation between Microsoft and Lsv Small
Given the investment horizon of 90 days Microsoft is expected to generate 1.12 times more return on investment than Lsv Small. However, Microsoft is 1.12 times more volatile than Lsv Small Cap. It trades about 0.06 of its potential returns per unit of risk. Lsv Small Cap is currently generating about 0.06 per unit of risk. If you would invest 32,151 in Microsoft on August 31, 2024 and sell it today you would earn a total of 10,195 from holding Microsoft or generate 31.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Microsoft vs. Lsv Small Cap
Performance |
| Timeline |
| Microsoft |
| Lsv Small Cap |
Microsoft and Lsv Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Lsv Small
The main advantage of trading using opposite Microsoft and Lsv Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lsv Small 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 Lsv Small will offset losses from the drop in Lsv Small's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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