Correlation Between Microsoft and Galectin Therapeutics
Can any of the company-specific risk be diversified away by investing in both Microsoft and Galectin 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 Galectin Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Galectin Therapeutics, you can compare the effects of market volatilities on Microsoft and Galectin 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 Galectin Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Galectin Therapeutics.
Diversification Opportunities for Microsoft and Galectin Therapeutics
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Galectin is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Galectin Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galectin 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 Galectin Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galectin Therapeutics has no effect on the direction of Microsoft i.e., Microsoft and Galectin Therapeutics go up and down completely randomly.
Pair Corralation between Microsoft and Galectin Therapeutics
Given the investment horizon of 90 days Microsoft is expected to generate 4.73 times less return on investment than Galectin Therapeutics. But when comparing it to its historical volatility, Microsoft is 3.48 times less risky than Galectin Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Galectin Therapeutics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 195.00 in Galectin Therapeutics on August 26, 2024 and sell it today you would earn a total of 83.00 from holding Galectin Therapeutics or generate 42.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Galectin Therapeutics
Performance |
| Timeline |
| Microsoft |
| Galectin Therapeutics |
Microsoft and Galectin Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Galectin Therapeutics
The main advantage of trading using opposite Microsoft and Galectin Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Galectin 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 Galectin Therapeutics will offset losses from the drop in Galectin Therapeutics' long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Rapid7 Inc |
| Galectin Therapeutics vs. Eliem Therapeutics | Galectin Therapeutics vs. HCW Biologics | Galectin Therapeutics vs. Scpharmaceuticals | Galectin 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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