Correlation Between Microsoft and EXACT Sciences
Can any of the company-specific risk be diversified away by investing in both Microsoft and EXACT Sciences 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 EXACT Sciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and EXACT Sciences, you can compare the effects of market volatilities on Microsoft and EXACT Sciences 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 EXACT Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and EXACT Sciences.
Diversification Opportunities for Microsoft and EXACT Sciences
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and EXACT is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and EXACT Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXACT Sciences 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 EXACT Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXACT Sciences has no effect on the direction of Microsoft i.e., Microsoft and EXACT Sciences go up and down completely randomly.
Pair Corralation between Microsoft and EXACT Sciences
Given the investment horizon of 90 days Microsoft is expected to generate 0.29 times more return on investment than EXACT Sciences. However, Microsoft is 3.51 times less risky than EXACT Sciences. It trades about -0.04 of its potential returns per unit of risk. EXACT Sciences is currently generating about -0.07 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. EXACT Sciences
Performance |
| Timeline |
| Microsoft |
| EXACT Sciences |
Microsoft and EXACT Sciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and EXACT Sciences
The main advantage of trading using opposite Microsoft and EXACT Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, EXACT Sciences 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 EXACT Sciences will offset losses from the drop in EXACT Sciences' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| EXACT Sciences vs. Natera Inc | EXACT Sciences vs. Caredx Inc | EXACT Sciences vs. Illumina | EXACT Sciences vs. Twist Bioscience Corp |
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 Stocks Directory module to find actively traded stocks across global markets.
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