Correlation Between Microsoft and Lyxor Treasury

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

By analyzing existing cross correlation between Microsoft and Lyxor Treasury 3 7Y, you can compare the effects of market volatilities on Microsoft and Lyxor Treasury 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 Lyxor Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Lyxor Treasury.

Diversification Opportunities for Microsoft and Lyxor Treasury

-0.83

Correlation Coefficient

Microsoft  Lyxor Treasury

Pay attention - limited upside

The 3 months correlation between Microsoft and Lyxor is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lyxor Treasury 3 7Y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Treasury 3 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 Lyxor Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Treasury 3 has no effect on the direction of Microsoft i.e., Microsoft and Lyxor Treasury go up and down completely randomly.

Pair Corralation between Microsoft and Lyxor Treasury

Given the investment horizon of 90 days Microsoft is expected to under-perform the Lyxor Treasury. In addition to that, Microsoft is 6.37 times more volatile than Lyxor Treasury 3 7Y. It trades about -0.1 of its total potential returns per unit of risk. Lyxor Treasury 3 7Y is currently generating about 0.16 per unit of volatility. If you would invest  1,021  in Lyxor Treasury 3 7Y on December 25, 2024 and sell it today you would earn a total of  26.00  from holding Lyxor Treasury 3 7Y or generate 2.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Microsoft  vs.  Lyxor Treasury 3 7Y

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.

Lyxor Treasury 3

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor Treasury 3 7Y are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lyxor Treasury is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Microsoft and Lyxor Treasury

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

The idea behind Microsoft and Lyxor Treasury 3 7Y 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.