Correlation Between Microsoft and Active Biotech
Can any of the company-specific risk be diversified away by investing in both Microsoft and Active Biotech 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 Active Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Active Biotech AB, you can compare the effects of market volatilities on Microsoft and Active Biotech 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 Active Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Active Biotech.
Diversification Opportunities for Microsoft and Active Biotech
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Microsoft and Active is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Active Biotech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active Biotech AB 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 Active Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active Biotech AB has no effect on the direction of Microsoft i.e., Microsoft and Active Biotech go up and down completely randomly.
Pair Corralation between Microsoft and Active Biotech
Given the investment horizon of 90 days Microsoft is expected to generate 1.1 times less return on investment than Active Biotech. But when comparing it to its historical volatility, Microsoft is 7.4 times less risky than Active Biotech. It trades about 0.08 of its potential returns per unit of risk. Active Biotech AB is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 101.00 in Active Biotech AB on September 3, 2024 and sell it today you would lose (74.00) from holding Active Biotech AB or give up 73.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.4% |
| Values | Daily Returns |
Microsoft vs. Active Biotech AB
Performance |
| Timeline |
| Microsoft |
| Active Biotech AB |
Microsoft and Active Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Active Biotech
The main advantage of trading using opposite Microsoft and Active Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Active Biotech 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 Active Biotech will offset losses from the drop in Active Biotech's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Active Biotech vs. BioInvent International AB | Active Biotech vs. Alligator Bioscience AB | Active Biotech vs. Swedish Orphan Biovitrum | Active Biotech vs. Anoto Group AB |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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