Correlation Between Microsoft and Fortress Biotech
Can any of the company-specific risk be diversified away by investing in both Microsoft and Fortress 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 Fortress Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Fortress Biotech, you can compare the effects of market volatilities on Microsoft and Fortress 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 Fortress Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Fortress Biotech.
Diversification Opportunities for Microsoft and Fortress Biotech
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Fortress is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Fortress Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech 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 Fortress Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortress Biotech has no effect on the direction of Microsoft i.e., Microsoft and Fortress Biotech go up and down completely randomly.
Pair Corralation between Microsoft and Fortress Biotech
Given the investment horizon of 90 days Microsoft is expected to generate 0.22 times more return on investment than Fortress Biotech. However, Microsoft is 4.61 times less risky than Fortress Biotech. It trades about 0.1 of its potential returns per unit of risk. Fortress Biotech is currently generating about -0.03 per unit of risk. If you would invest 22,130 in Microsoft on August 28, 2024 and sell it today you would earn a total of 19,749 from holding Microsoft or generate 89.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Fortress Biotech
Performance |
| Timeline |
| Microsoft |
| Fortress Biotech |
Microsoft and Fortress Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Fortress Biotech
The main advantage of trading using opposite Microsoft and Fortress Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Fortress 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 Fortress Biotech will offset losses from the drop in Fortress Biotech's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Fortress Biotech vs. Mustang Bio | Fortress Biotech vs. Achilles Therapeutics PLC | Fortress Biotech vs. Aptose Biosciences | Fortress Biotech vs. Fortress Biotech Pref |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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