Correlation Between Microsoft and Supernus Pharmaceuticals

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

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

Diversification Opportunities for Microsoft and Supernus Pharmaceuticals

-0.32

Correlation Coefficient

Microsoft  Supernus Pharmaceuticals

Very good diversification

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

Pair Corralation between Microsoft and Supernus Pharmaceuticals

Given the investment horizon of 90 days Microsoft is expected to generate 1.94 times less return on investment than Supernus Pharmaceuticals. But when comparing it to its historical volatility, Microsoft is 1.61 times less risky than Supernus Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. Supernus Pharmaceuticals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,471  in Supernus Pharmaceuticals on August 31, 2024 and sell it today you would earn a total of  228.00  from holding Supernus Pharmaceuticals or generate 6.57% return on investment over 90 days.

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

Microsoft  vs.  Supernus Pharmaceuticals

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.

Supernus Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Supernus Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Supernus Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Microsoft and Supernus Pharmaceuticals

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

The idea behind Microsoft and Supernus 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.