Correlation Between Microsoft and Emcure Pharmaceuticals

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

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

Diversification Opportunities for Microsoft and Emcure Pharmaceuticals

-0.17

Correlation Coefficient

Microsoft  Emcure Pharmaceuticals

Good diversification

The 3 months correlation between Microsoft and Emcure is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Emcure Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emcure Pharmaceuticals 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 Emcure Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emcure Pharmaceuticals has no effect on the direction of Microsoft i.e., Microsoft and Emcure Pharmaceuticals go up and down completely randomly.

Pair Corralation between Microsoft and Emcure Pharmaceuticals

Given the investment horizon of 90 days Microsoft is expected to generate 2.44 times less return on investment than Emcure Pharmaceuticals. But when comparing it to its historical volatility, Microsoft is 2.67 times less risky than Emcure Pharmaceuticals. It trades about 0.09 of its potential returns per unit of risk. Emcure Pharmaceuticals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  100,800  in Emcure Pharmaceuticals on September 23, 2024 and sell it today you would earn a total of  36,490  from holding Emcure Pharmaceuticals or generate 36.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.54%
Values	Daily Returns

Microsoft  vs.  Emcure Pharmaceuticals

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Emcure Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Microsoft and Emcure Pharmaceuticals

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

The idea behind Microsoft and Emcure Pharmaceuticals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.