Correlation Between Microsoft and InhibrxInc

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

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

Diversification Opportunities for Microsoft and InhibrxInc

-0.24

Correlation Coefficient

Microsoft  InhibrxInc

Very good diversification

The 3 months correlation between Microsoft and InhibrxInc is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and InhibrxInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InhibrxInc 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 InhibrxInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InhibrxInc has no effect on the direction of Microsoft i.e., Microsoft and InhibrxInc go up and down completely randomly.

Pair Corralation between Microsoft and InhibrxInc

Given the investment horizon of 90 days Microsoft is expected to generate 0.69 times more return on investment than InhibrxInc. However, Microsoft is 1.45 times less risky than InhibrxInc. It trades about 0.05 of its potential returns per unit of risk. InhibrxInc is currently generating about 0.03 per unit of risk. If you would invest  39,793  in Microsoft on January 19, 2024 and sell it today you would earn a total of  1,391  from holding Microsoft or generate 3.5% return on investment over 90 days.

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

Microsoft  vs.  InhibrxInc

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

InhibrxInc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in InhibrxInc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, InhibrxInc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and InhibrxInc

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

The idea behind Microsoft and InhibrxInc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.