Correlation Between Microsoft and Golden Biotechnology
Can any of the company-specific risk be diversified away by investing in both Microsoft and Golden Biotechnology 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 Golden Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Golden Biotechnology, you can compare the effects of market volatilities on Microsoft and Golden Biotechnology 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 Golden Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Golden Biotechnology.
Diversification Opportunities for Microsoft and Golden Biotechnology
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Golden is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Golden Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Biotechnology 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 Golden Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Biotechnology has no effect on the direction of Microsoft i.e., Microsoft and Golden Biotechnology go up and down completely randomly.
Pair Corralation between Microsoft and Golden Biotechnology
Given the investment horizon of 90 days Microsoft is expected to generate 0.71 times more return on investment than Golden Biotechnology. However, Microsoft is 1.4 times less risky than Golden Biotechnology. It trades about 0.19 of its potential returns per unit of risk. Golden Biotechnology is currently generating about -0.24 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Golden Biotechnology
Performance |
| Timeline |
| Microsoft |
| Golden Biotechnology |
Microsoft and Golden Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Golden Biotechnology
The main advantage of trading using opposite Microsoft and Golden Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Golden Biotechnology 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 Golden Biotechnology will offset losses from the drop in Golden Biotechnology's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Golden Biotechnology vs. Grape King Bio | Golden Biotechnology vs. ScinoPharm Taiwan | Golden Biotechnology vs. TTY Biopharm Co | Golden Biotechnology vs. YungShin Global Holding |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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