Correlation Between Moderna and Microsoft

Can any of the company-specific risk be diversified away by investing in both Moderna and Microsoft 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 Moderna and Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Moderna and Microsoft, you can compare the effects of market volatilities on Moderna and Microsoft 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 Moderna with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderna and Microsoft.

Diversification Opportunities for Moderna and Microsoft

0.67

Correlation Coefficient

Moderna  Microsoft

Poor diversification

The 3 months correlation between Moderna and Microsoft is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Moderna and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Moderna 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 Moderna are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Moderna i.e., Moderna and Microsoft go up and down completely randomly.

Pair Corralation between Moderna and Microsoft

Assuming the 90 days horizon Moderna is expected to under-perform the Microsoft. In addition to that, Moderna is 3.47 times more volatile than Microsoft. It trades about -0.08 of its total potential returns per unit of risk. Microsoft is currently generating about -0.15 per unit of volatility. If you would invest  40,678  in Microsoft on December 31, 2024 and sell it today you would lose (5,808) from holding Microsoft or give up 14.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Moderna  vs.  Microsoft

Moderna

Risk-Adjusted Performance

Very Weak

Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Moderna and Microsoft

The main advantage of trading using opposite Moderna and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderna position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.

The idea behind Moderna and Microsoft pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.