Correlation Between MICROSOFT and Abcellera Biologics

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

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

Diversification Opportunities for MICROSOFT and Abcellera Biologics

-0.26

Correlation Coefficient

MICROSOFT  Abcellera Biologics

Very good diversification

The 3 months correlation between MICROSOFT and Abcellera is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding MICROSOFT PORATION and Abcellera Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abcellera Biologics 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 PORATION are associated (or correlated) with Abcellera Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abcellera Biologics has no effect on the direction of MICROSOFT i.e., MICROSOFT and Abcellera Biologics go up and down completely randomly.

Pair Corralation between MICROSOFT and Abcellera Biologics

Assuming the 90 days trading horizon MICROSOFT PORATION is expected to generate 0.21 times more return on investment than Abcellera Biologics. However, MICROSOFT PORATION is 4.77 times less risky than Abcellera Biologics. It trades about -0.1 of its potential returns per unit of risk. Abcellera Biologics is currently generating about -0.04 per unit of risk. If you would invest  6,533  in MICROSOFT PORATION on December 1, 2024 and sell it today you would lose (371.00) from holding MICROSOFT PORATION or give up 5.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

MICROSOFT PORATION  vs.  Abcellera Biologics

MICROSOFT PORATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days MICROSOFT PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MICROSOFT is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Abcellera Biologics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Abcellera Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with MICROSOFT and Abcellera Biologics

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

The idea behind MICROSOFT PORATION and Abcellera Biologics 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.