Correlation Between Microsoft and Biophytis

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

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

Diversification Opportunities for Microsoft and Biophytis

-0.1

Correlation Coefficient

Microsoft  Biophytis

Good diversification

The 3 months correlation between Microsoft and Biophytis is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Biophytis SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biophytis SA 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 Biophytis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biophytis SA has no effect on the direction of Microsoft i.e., Microsoft and Biophytis go up and down completely randomly.

Pair Corralation between Microsoft and Biophytis

Given the investment horizon of 90 days Microsoft is expected to generate 0.3 times more return on investment than Biophytis. However, Microsoft is 3.34 times less risky than Biophytis. It trades about 0.05 of its potential returns per unit of risk. Biophytis SA is currently generating about -0.19 per unit of risk. If you would invest  40,862  in Microsoft on August 31, 2024 and sell it today you would earn a total of  1,437  from holding Microsoft or generate 3.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Biophytis SA

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.

Biophytis SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biophytis SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Microsoft and Biophytis

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

The idea behind Microsoft and Biophytis SA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.