Correlation Between Microsoft and Acasti Pharma

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

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

Diversification Opportunities for Microsoft and Acasti Pharma

-0.14

Correlation Coefficient

Microsoft  Acasti Pharma

Good diversification

The 3 months correlation between Microsoft and Acasti is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Acasti Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acasti 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 Acasti Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acasti Pharma has no effect on the direction of Microsoft i.e., Microsoft and Acasti Pharma go up and down completely randomly.

Pair Corralation between Microsoft and Acasti Pharma

Given the investment horizon of 90 days Microsoft is expected to generate 4.02 times less return on investment than Acasti Pharma. But when comparing it to its historical volatility, Microsoft is 3.62 times less risky than Acasti Pharma. It trades about 0.05 of its potential returns per unit of risk. Acasti Pharma is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  233.00  in Acasti Pharma on September 2, 2024 and sell it today you would earn a total of  104.00  from holding Acasti Pharma or generate 44.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.32%
Values	Daily Returns

Microsoft  vs.  Acasti Pharma

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Acasti Pharma

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Acasti Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Acasti Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Acasti Pharma

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

The idea behind Microsoft and Acasti Pharma 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.