Correlation Between Microsoft and BioNTech
Can any of the company-specific risk be diversified away by investing in both Microsoft and BioNTech 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 BioNTech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and BioNTech SE, you can compare the effects of market volatilities on Microsoft and BioNTech 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 BioNTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and BioNTech.
Diversification Opportunities for Microsoft and BioNTech
Very weak diversification
The 3 months correlation between Microsoft and BioNTech is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BioNTech SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioNTech SE 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 BioNTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioNTech SE has no effect on the direction of Microsoft i.e., Microsoft and BioNTech go up and down completely randomly.
Pair Corralation between Microsoft and BioNTech
Given the investment horizon of 90 days Microsoft is expected to generate 1.74 times less return on investment than BioNTech. But when comparing it to its historical volatility, Microsoft is 3.26 times less risky than BioNTech. It trades about 0.19 of its potential returns per unit of risk. BioNTech SE is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 10,490 in BioNTech SE on September 1, 2024 and sell it today you would earn a total of 760.00 from holding BioNTech SE or generate 7.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Microsoft vs. BioNTech SE
Performance |
| Timeline |
| Microsoft |
| BioNTech SE |
Microsoft and BioNTech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and BioNTech
The main advantage of trading using opposite Microsoft and BioNTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BioNTech 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 BioNTech will offset losses from the drop in BioNTech's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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