Correlation Between Microsoft and CytomX Therapeutics
Can any of the company-specific risk be diversified away by investing in both Microsoft and CytomX Therapeutics 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 CytomX Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CytomX Therapeutics, you can compare the effects of market volatilities on Microsoft and CytomX Therapeutics 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 CytomX Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CytomX Therapeutics.
Diversification Opportunities for Microsoft and CytomX Therapeutics
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and CytomX is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CytomX Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CytomX Therapeutics 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 CytomX Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CytomX Therapeutics has no effect on the direction of Microsoft i.e., Microsoft and CytomX Therapeutics go up and down completely randomly.
Pair Corralation between Microsoft and CytomX Therapeutics
Given the investment horizon of 90 days Microsoft is expected to generate 1.77 times less return on investment than CytomX Therapeutics. But when comparing it to its historical volatility, Microsoft is 7.54 times less risky than CytomX Therapeutics. It trades about 0.08 of its potential returns per unit of risk. CytomX Therapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 164.00 in CytomX Therapeutics on August 27, 2024 and sell it today you would lose (75.00) from holding CytomX Therapeutics or give up 45.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. CytomX Therapeutics
Performance |
| Timeline |
| Microsoft |
| CytomX Therapeutics |
Microsoft and CytomX Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CytomX Therapeutics
The main advantage of trading using opposite Microsoft and CytomX Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, CytomX Therapeutics 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 CytomX Therapeutics will offset losses from the drop in CytomX Therapeutics' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
| CytomX Therapeutics vs. Eliem Therapeutics | CytomX Therapeutics vs. HCW Biologics | CytomX Therapeutics vs. Scpharmaceuticals | CytomX Therapeutics vs. Milestone Pharmaceuticals |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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