Correlation Between Microsoft and Lendlease

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

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

Diversification Opportunities for Microsoft and Lendlease

0.11

Correlation Coefficient

Microsoft  Lendlease

Average diversification

The 3 months correlation between Microsoft and Lendlease is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group 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 Lendlease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendlease Group has no effect on the direction of Microsoft i.e., Microsoft and Lendlease go up and down completely randomly.

Pair Corralation between Microsoft and Lendlease

Given the investment horizon of 90 days Microsoft is expected to generate 0.98 times more return on investment than Lendlease. However, Microsoft is 1.02 times less risky than Lendlease. It trades about -0.08 of its potential returns per unit of risk. Lendlease Group is currently generating about -0.15 per unit of risk. If you would invest  43,012  in Microsoft on November 30, 2024 and sell it today you would lose (3,298) from holding Microsoft or give up 7.67% of portfolio value over 90 days.

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

Microsoft  vs.  Lendlease Group

Microsoft

Risk-Adjusted Performance

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Lendlease Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lendlease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and Lendlease

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

The idea behind Microsoft and Lendlease Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.