Correlation Between Microsoft and Insmed
Can any of the company-specific risk be diversified away by investing in both Microsoft and Insmed 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 Insmed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Insmed Inc, you can compare the effects of market volatilities on Microsoft and Insmed 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 Insmed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Insmed.
Diversification Opportunities for Microsoft and Insmed
Significant diversification
The 3 months correlation between Microsoft and Insmed is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Insmed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insmed Inc 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 Insmed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insmed Inc has no effect on the direction of Microsoft i.e., Microsoft and Insmed go up and down completely randomly.
Pair Corralation between Microsoft and Insmed
Given the investment horizon of 90 days Microsoft is expected to under-perform the Insmed. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.03 times less risky than Insmed. The stock trades about -0.05 of its potential returns per unit of risk. The Insmed Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,196 in Insmed Inc on August 27, 2024 and sell it today you would earn a total of 213.00 from holding Insmed Inc or generate 2.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Insmed Inc
Performance |
| Timeline |
| Microsoft |
| Insmed Inc |
Microsoft and Insmed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Insmed
The main advantage of trading using opposite Microsoft and Insmed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Insmed 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 Insmed will offset losses from the drop in Insmed's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Insmed vs. Ascendis Pharma AS | Insmed vs. Apellis Pharmaceuticals | Insmed vs. BeiGene | Insmed vs. Akero Therapeutics |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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