Correlation Between Microsoft and IGM Biosciences

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

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

Diversification Opportunities for Microsoft and IGM Biosciences

0.52

Correlation Coefficient

Microsoft  IGM Biosciences

Very weak diversification

The 3 months correlation between Microsoft and IGM is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and IGM Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Biosciences 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 IGM Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Biosciences has no effect on the direction of Microsoft i.e., Microsoft and IGM Biosciences go up and down completely randomly.

Pair Corralation between Microsoft and IGM Biosciences

Given the investment horizon of 90 days Microsoft is expected to generate 0.16 times more return on investment than IGM Biosciences. However, Microsoft is 6.13 times less risky than IGM Biosciences. It trades about -0.11 of its potential returns per unit of risk. IGM Biosciences is currently generating about -0.18 per unit of risk. If you would invest  42,398  in Microsoft on December 28, 2024 and sell it today you would lose (4,518) from holding Microsoft or give up 10.66% of portfolio value over 90 days.

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

Microsoft  vs.  IGM Biosciences

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. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

IGM Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days IGM Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and IGM Biosciences

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

The idea behind Microsoft and IGM Biosciences 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 Commodity Directory module to find actively traded commodities issued by global exchanges.