Can someone explain why Microsoft has overall the strongest negative correlation with Activision/Blizzard(-0.87) on a 1 year basis. That must be related to the aquistion but I can not figure out how.
- The acquiring company's share price drops because it often pays a premium for the target company, or incurs debt to finance the acquisition.
- The target company's short-term share price tends to rise because the shareholders only agree to the deal if the purchase price exceeds their company's current value.
As an aside, the methodology says "We calculate the correlations between 2 securities on the daily closing values of the last 20 years. If one of the two securities has not been on the market for so long, we use all available prices to calculate the correlation." - hopefully the author means daily changes, not daily values, because otherwise everything is spurious.