Correlation Between Microsoft and Serina Therapeutics

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

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

Diversification Opportunities for Microsoft and Serina Therapeutics

-0.32

Correlation Coefficient

Microsoft  Serina Therapeutics

Very good diversification

The 3 months correlation between Microsoft and Serina is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Serina Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Serina Therapeutics 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 Serina Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Serina Therapeutics has no effect on the direction of Microsoft i.e., Microsoft and Serina Therapeutics go up and down completely randomly.

Pair Corralation between Microsoft and Serina Therapeutics

Given the investment horizon of 90 days Microsoft is expected to generate 0.11 times more return on investment than Serina Therapeutics. However, Microsoft is 9.38 times less risky than Serina Therapeutics. It trades about 0.51 of its potential returns per unit of risk. Serina Therapeutics is currently generating about 0.01 per unit of risk. If you would invest  41,493  in Microsoft on September 19, 2024 and sell it today you would earn a total of  3,953  from holding Microsoft or generate 9.53% return on investment over 90 days.

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

Microsoft  vs.  Serina Therapeutics

Microsoft

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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.

Serina Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Serina Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Serina Therapeutics is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Microsoft and Serina Therapeutics

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

The idea behind Microsoft and Serina Therapeutics 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.