Correlation Between Microsoft and Leo Global

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Can any of the company-specific risk be diversified away by investing in both Microsoft and Leo Global 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 Leo Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Leo Global Logistics, you can compare the effects of market volatilities on Microsoft and Leo Global 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 Leo Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Leo Global.

Diversification Opportunities for Microsoft and Leo Global

MicrosoftLeoDiversified AwayMicrosoftLeoDiversified Away100%
-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Microsoft and Leo is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Leo Global Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leo Global Logistics 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 Leo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leo Global Logistics has no effect on the direction of Microsoft i.e., Microsoft and Leo Global go up and down completely randomly.

Pair Corralation between Microsoft and Leo Global

Given the investment horizon of 90 days Microsoft is expected to generate 0.74 times more return on investment than Leo Global. However, Microsoft is 1.35 times less risky than Leo Global. It trades about 0.01 of its potential returns per unit of risk. Leo Global Logistics is currently generating about -0.3 per unit of risk. If you would invest  41,830  in Microsoft on October 14, 2024 and sell it today you would earn a total of  65.00  from holding Microsoft or generate 0.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy96.77%
ValuesDaily Returns

Microsoft  vs.  Leo Global Logistics

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -30-20-10010
JavaScript chart by amCharts 3.21.15MSFT LEO
       Timeline  
Microsoft 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan410420430440450
Leo Global Logistics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Leo Global Logistics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan2.833.23.43.63.84

Microsoft and Leo Global Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.14-3.1-2.06-1.02-0.01731.022.083.144.25.26 0.050.100.150.20
JavaScript chart by amCharts 3.21.15MSFT LEO
       Returns  

Pair Trading with Microsoft and Leo Global

The main advantage of trading using opposite Microsoft and Leo Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Leo Global 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 Leo Global will offset losses from the drop in Leo Global's long position.
The idea behind Microsoft and Leo Global Logistics 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.
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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