Correlation Between Microsoft and Moderna
Can any of the company-specific risk be diversified away by investing in both Microsoft and Moderna 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 Moderna into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Moderna, you can compare the effects of market volatilities on Microsoft and Moderna 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 Moderna. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Moderna.
Diversification Opportunities for Microsoft and Moderna
Good diversification
The 3 months correlation between Microsoft and Moderna is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna 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 Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of Microsoft i.e., Microsoft and Moderna go up and down completely randomly.
Pair Corralation between Microsoft and Moderna
Given the investment horizon of 90 days Microsoft is expected to generate 0.37 times more return on investment than Moderna. However, Microsoft is 2.71 times less risky than Moderna. It trades about 0.05 of its potential returns per unit of risk. Moderna is currently generating about -0.07 per unit of risk. If you would invest 33,207 in Microsoft on August 27, 2024 and sell it today you would earn a total of 8,493 from holding Microsoft or generate 25.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Moderna
Performance |
| Timeline |
| Microsoft |
| Moderna |
Microsoft and Moderna Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Moderna
The main advantage of trading using opposite Microsoft and Moderna positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Moderna 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 Moderna will offset losses from the drop in Moderna's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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