Correlation Between Microsoft and LivePerson
Can any of the company-specific risk be diversified away by investing in both Microsoft and LivePerson 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 LivePerson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and LivePerson, you can compare the effects of market volatilities on Microsoft and LivePerson 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 LivePerson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and LivePerson.
Diversification Opportunities for Microsoft and LivePerson
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and LivePerson is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and LivePerson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LivePerson 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 LivePerson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LivePerson has no effect on the direction of Microsoft i.e., Microsoft and LivePerson go up and down completely randomly.
Pair Corralation between Microsoft and LivePerson
Given the investment horizon of 90 days Microsoft is expected to generate 0.18 times more return on investment than LivePerson. However, Microsoft is 5.56 times less risky than LivePerson. It trades about -0.14 of its potential returns per unit of risk. LivePerson is currently generating about -0.76 per unit of risk. If you would invest 42,165 in Microsoft on January 26, 2024 and sell it today you would lose (1,259) from holding Microsoft or give up 2.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 76.19% |
| Values | Daily Returns |
Microsoft vs. LivePerson
Performance |
| Timeline |
| Microsoft |
| LivePerson |
Microsoft and LivePerson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and LivePerson
The main advantage of trading using opposite Microsoft and LivePerson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, LivePerson 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 LivePerson will offset losses from the drop in LivePerson's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| LivePerson vs. Nice | LivePerson vs. Tower Semiconductor | LivePerson vs. Opko Health | LivePerson vs. Elbit Systems |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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