Correlation Between Microsoft and Heidelberg Pharma

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

By analyzing existing cross correlation between Microsoft and Heidelberg Pharma AG, you can compare the effects of market volatilities on Microsoft and Heidelberg 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 Heidelberg Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Heidelberg Pharma.

Diversification Opportunities for Microsoft and Heidelberg Pharma

-0.32

Correlation Coefficient

Microsoft  Heidelberg Pharma

Very good diversification

The 3 months correlation between Microsoft and Heidelberg is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Heidelberg Pharma AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg 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 Heidelberg Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Pharma has no effect on the direction of Microsoft i.e., Microsoft and Heidelberg Pharma go up and down completely randomly.

Pair Corralation between Microsoft and Heidelberg Pharma

Assuming the 90 days trading horizon Microsoft is expected to generate 0.31 times more return on investment than Heidelberg Pharma. However, Microsoft is 3.21 times less risky than Heidelberg Pharma. It trades about -0.2 of its potential returns per unit of risk. Heidelberg Pharma AG is currently generating about -0.09 per unit of risk. If you would invest  42,205  in Microsoft on October 9, 2024 and sell it today you would lose (1,300) from holding Microsoft or give up 3.08% of portfolio value over 90 days.

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

Microsoft  vs.  Heidelberg Pharma AG

Microsoft

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Heidelberg Pharma

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Pharma AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Heidelberg Pharma is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and Heidelberg Pharma

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

The idea behind Microsoft and Heidelberg Pharma AG 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.