Correlation Between Microsoft and Longwen Group
Can any of the company-specific risk be diversified away by investing in both Microsoft and Longwen Group 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 Longwen Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Longwen Group Corp, you can compare the effects of market volatilities on Microsoft and Longwen Group 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 Longwen Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Longwen Group.
Diversification Opportunities for Microsoft and Longwen Group
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Longwen is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Longwen Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longwen Group Corp 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 Longwen Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longwen Group Corp has no effect on the direction of Microsoft i.e., Microsoft and Longwen Group go up and down completely randomly.
Pair Corralation between Microsoft and Longwen Group
Given the investment horizon of 90 days Microsoft is expected to under-perform the Longwen Group. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 13.42 times less risky than Longwen Group. The stock trades about -0.04 of its potential returns per unit of risk. The Longwen Group Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 10.00 in Longwen Group Corp on August 30, 2024 and sell it today you would earn a total of 20.00 from holding Longwen Group Corp or generate 200.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Longwen Group Corp
Performance |
| Timeline |
| Microsoft |
| Longwen Group Corp |
Microsoft and Longwen Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Longwen Group
The main advantage of trading using opposite Microsoft and Longwen Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Longwen Group 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 Longwen Group will offset losses from the drop in Longwen Group's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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