Correlation Between Microsoft and Aslan Pharmaceuticals

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Can any of the company-specific risk be diversified away by investing in both Microsoft and Aslan 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 Aslan Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Aslan Pharmaceuticals, you can compare the effects of market volatilities on Microsoft and Aslan 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 Aslan Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Aslan Pharmaceuticals.

Diversification Opportunities for Microsoft and Aslan Pharmaceuticals

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Microsoft and Aslan is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Aslan Pharmaceuticals Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aslan 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 Aslan Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aslan Pharmaceuticals has no effect on the direction of Microsoft i.e., Microsoft and Aslan Pharmaceuticals go up and down completely randomly.

Pair Corralation between Microsoft and Aslan Pharmaceuticals

Given the investment horizon of 90 days Microsoft is expected to generate 27.73 times less return on investment than Aslan Pharmaceuticals. But when comparing it to its historical volatility, Microsoft is 29.01 times less risky than Aslan Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. Aslan Pharmaceuticals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Aslan Pharmaceuticals on December 30, 2023 and sell it today you would lose (8.00) from holding Aslan Pharmaceuticals or give up 11.43% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Microsoft  vs.  Aslan Pharmaceuticals Ltd

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.
Aslan Pharmaceuticals 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Aslan Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Aslan Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Microsoft and Aslan Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and Aslan Pharmaceuticals

The main advantage of trading using opposite Microsoft and Aslan Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Aslan 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 Aslan Pharmaceuticals will offset losses from the drop in Aslan Pharmaceuticals' long position.
The idea behind Microsoft and Aslan 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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