Correlation Between Microsoft and Astellas Pharma
Can any of the company-specific risk be diversified away by investing in both Microsoft and Astellas Pharma 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 Astellas Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Astellas Pharma, you can compare the effects of market volatilities on Microsoft and Astellas Pharma 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 Astellas Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Astellas Pharma.
Diversification Opportunities for Microsoft and Astellas Pharma
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Astellas is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Astellas Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astellas Pharma 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 Astellas Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astellas Pharma has no effect on the direction of Microsoft i.e., Microsoft and Astellas Pharma go up and down completely randomly.
Pair Corralation between Microsoft and Astellas Pharma
Assuming the 90 days trading horizon Microsoft is expected to generate 1.65 times more return on investment than Astellas Pharma. However, Microsoft is 1.65 times more volatile than Astellas Pharma. It trades about 0.02 of its potential returns per unit of risk. Astellas Pharma is currently generating about -0.38 per unit of risk. If you would invest 39,831 in Microsoft on August 30, 2024 and sell it today you would earn a total of 264.00 from holding Microsoft or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Astellas Pharma
Performance |
| Timeline |
| Microsoft |
| Astellas Pharma |
Microsoft and Astellas Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Astellas Pharma
The main advantage of trading using opposite Microsoft and Astellas Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Astellas Pharma 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 Astellas Pharma will offset losses from the drop in Astellas Pharma's long position.| Microsoft vs. EAGLE MATERIALS | Microsoft vs. Applied Materials | Microsoft vs. British American Tobacco | Microsoft vs. ETFS Coffee ETC |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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