Correlation Between Microsoft and Novacyt SA

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

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

Diversification Opportunities for Microsoft and Novacyt SA

-0.42

Correlation Coefficient

Microsoft  Novacyt SA

Very good diversification

The 3 months correlation between Microsoft and Novacyt is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Novacyt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novacyt 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 Novacyt SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novacyt SA has no effect on the direction of Microsoft i.e., Microsoft and Novacyt SA go up and down completely randomly.

Pair Corralation between Microsoft and Novacyt SA

Given the investment horizon of 90 days Microsoft is expected to generate 0.28 times more return on investment than Novacyt SA. However, Microsoft is 3.51 times less risky than Novacyt SA. It trades about 0.01 of its potential returns per unit of risk. Novacyt SA is currently generating about -0.12 per unit of risk. If you would invest  42,944  in Microsoft on September 30, 2024 and sell it today you would earn a total of  109.00  from holding Microsoft or generate 0.25% return on investment over 90 days.

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

Microsoft  vs.  Novacyt SA

Microsoft

Risk-Adjusted Performance

0 of 100

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 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.

Novacyt SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novacyt SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and Novacyt SA

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

The idea behind Microsoft and Novacyt 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.