Correlation Between Microsoft and Lucibel

Can any of the company-specific risk be diversified away by investing in both Microsoft and Lucibel 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 Lucibel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and Lucibel, you can compare the effects of market volatilities on Microsoft and Lucibel 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 Lucibel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lucibel.

Diversification Opportunities for Microsoft and Lucibel

-0.39

Correlation Coefficient

Microsoft  Lucibel

Very good diversification

The 3 months correlation between Microsoft and Lucibel is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lucibel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucibel 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 Lucibel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucibel has no effect on the direction of Microsoft i.e., Microsoft and Lucibel go up and down completely randomly.

Pair Corralation between Microsoft and Lucibel

Given the investment horizon of 90 days Microsoft is expected to generate 2.57 times less return on investment than Lucibel. But when comparing it to its historical volatility, Microsoft is 7.01 times less risky than Lucibel. It trades about 0.1 of its potential returns per unit of risk. Lucibel is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Lucibel on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Lucibel or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Lucibel

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Lucibel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucibel has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Microsoft and Lucibel

The main advantage of trading using opposite Microsoft and Lucibel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Lucibel 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 Lucibel will offset losses from the drop in Lucibel's long position.

The idea behind Microsoft and Lucibel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.