Correlation Between Brickell Biotech and Microsoft

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

Diversification Opportunities for Brickell Biotech and Microsoft

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Brickell and Microsoft is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Brickell Biotech and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Brickell Biotech 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 Brickell Biotech are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Brickell Biotech i.e., Brickell Biotech and Microsoft go up and down completely randomly.

Pair Corralation between Brickell Biotech and Microsoft

Considering the 90-day investment horizon Brickell Biotech is expected to under-perform the Microsoft. In addition to that, Brickell Biotech is 4.58 times more volatile than Microsoft. It trades about -0.06 of its total potential returns per unit of risk. Microsoft is currently generating about 0.03 per unit of volatility. If you would invest  20,952  in Microsoft on September 2, 2022 and sell it today you would earn a total of  4,517  from holding Microsoft or generate 21.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Brickell Biotech  vs.  Microsoft

 Performance (%) 
       Timeline  
Brickell Biotech 
Brickell Performance
0 of 100
Over the last 90 days Brickell Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Brickell Price Channel

Microsoft 
Microsoft Performance
0 of 100
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.

Microsoft Price Channel

Brickell Biotech and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Brickell Biotech and Microsoft

The main advantage of trading using opposite Brickell Biotech and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brickell Biotech position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.
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The idea behind Brickell Biotech and Microsoft 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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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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