Correlation Between Microsoft and Nextage Therapeutics
Can any of the company-specific risk be diversified away by investing in both Microsoft and Nextage 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 Nextage Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nextage Therapeutics, you can compare the effects of market volatilities on Microsoft and Nextage 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 Nextage Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nextage Therapeutics.
Diversification Opportunities for Microsoft and Nextage Therapeutics
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and Nextage is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nextage Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextage 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 Nextage Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextage Therapeutics has no effect on the direction of Microsoft i.e., Microsoft and Nextage Therapeutics go up and down completely randomly.
Pair Corralation between Microsoft and Nextage Therapeutics
Given the investment horizon of 90 days Microsoft is expected to under-perform the Nextage Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 2.79 times less risky than Nextage Therapeutics. The stock trades about -0.04 of its potential returns per unit of risk. The Nextage Therapeutics is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 7,600 in Nextage Therapeutics on November 8, 2024 and sell it today you would earn a total of 2,210 from holding Nextage Therapeutics or generate 29.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 85.71% |
| Values | Daily Returns |
Microsoft vs. Nextage Therapeutics
Performance |
| Timeline |
| Microsoft |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Nextage Therapeutics |
Microsoft and Nextage Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Nextage Therapeutics
The main advantage of trading using opposite Microsoft and Nextage Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Nextage 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 Nextage Therapeutics will offset losses from the drop in Nextage Therapeutics' long position.| Microsoft vs. Crowdstrike Holdings | Microsoft vs. Okta Inc | Microsoft vs. Cloudflare | Microsoft vs. MongoDB |
| Nextage Therapeutics vs. Arad Investment Industrial | Nextage Therapeutics vs. Menif Financial Services | Nextage Therapeutics vs. Tower Semiconductor | Nextage Therapeutics vs. Bank Leumi Le Israel |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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