Correlation Between Microsoft and Regeneron Pharmaceuticals

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

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

Diversification Opportunities for Microsoft and Regeneron Pharmaceuticals

0.33

Correlation Coefficient

Microsoft  Regeneron Pharmaceuticals

Weak diversification

The 3 months correlation between Microsoft and Regeneron is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Regeneron Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regeneron 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 Regeneron Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regeneron Pharmaceuticals has no effect on the direction of Microsoft i.e., Microsoft and Regeneron Pharmaceuticals go up and down completely randomly.

Pair Corralation between Microsoft and Regeneron Pharmaceuticals

Given the investment horizon of 90 days Microsoft is expected to under-perform the Regeneron Pharmaceuticals. In addition to that, Microsoft is 1.4 times more volatile than Regeneron Pharmaceuticals. It trades about -0.08 of its total potential returns per unit of risk. Regeneron Pharmaceuticals is currently generating about -0.08 per unit of volatility. If you would invest  97,119  in Regeneron Pharmaceuticals on February 2, 2024 and sell it today you would lose (3,358) from holding Regeneron Pharmaceuticals or give up 3.46% of portfolio value over 90 days.

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

Microsoft  vs.  Regeneron Pharmaceuticals

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Regeneron Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regeneron Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Regeneron Pharmaceuticals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Regeneron Pharmaceuticals

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

The idea behind Microsoft and Regeneron 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.