Correlation Between Microsoft and MEI Pharma
Can any of the company-specific risk be diversified away by investing in both Microsoft and MEI Pharma 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 MEI Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and MEI Pharma, you can compare the effects of market volatilities on Microsoft and MEI Pharma 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 MEI Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and MEI Pharma.
Diversification Opportunities for Microsoft and MEI Pharma
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and MEI is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and MEI Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEI Pharma 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 MEI Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEI Pharma has no effect on the direction of Microsoft i.e., Microsoft and MEI Pharma go up and down completely randomly.
Pair Corralation between Microsoft and MEI Pharma
Given the investment horizon of 90 days Microsoft is expected to under-perform the MEI Pharma. In addition to that, Microsoft is 1.04 times more volatile than MEI Pharma. It trades about -0.01 of its total potential returns per unit of risk. MEI Pharma is currently generating about 0.29 per unit of volatility. If you would invest 255.00 in MEI Pharma on November 3, 2024 and sell it today you would earn a total of 30.00 from holding MEI Pharma or generate 11.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. MEI Pharma
Performance |
| Timeline |
| Microsoft |
| MEI Pharma |
Microsoft and MEI Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and MEI Pharma
The main advantage of trading using opposite Microsoft and MEI Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, MEI Pharma 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 MEI Pharma will offset losses from the drop in MEI Pharma's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| MEI Pharma vs. Kezar Life Sciences | MEI Pharma vs. Vincerx Pharma | MEI Pharma vs. Avenue Therapeutics | MEI Pharma vs. Assembly Biosciences |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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