Correlation Between Microsoft and Celgene

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

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

Diversification Opportunities for Microsoft and Celgene

0.0

Correlation Coefficient

Microsoft  Celgene

Pay attention - limited upside

The 3 months correlation between Microsoft and Celgene is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Celgene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celgene 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 Celgene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celgene has no effect on the direction of Microsoft i.e., Microsoft and Celgene go up and down completely randomly.

Pair Corralation between Microsoft and Celgene

If you would invest  43,098  in Microsoft on October 1, 2024 and sell it today you would lose (45.00) from holding Microsoft or give up 0.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Microsoft  vs.  Celgene

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Celgene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celgene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Celgene is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and Celgene

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

The idea behind Microsoft and Celgene 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..