Correlation Between Microsoft and JDS UNIPHASE
Can any of the company-specific risk be diversified away by investing in both Microsoft and JDS UNIPHASE 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 JDS UNIPHASE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and JDS UNIPHASE, you can compare the effects of market volatilities on Microsoft and JDS UNIPHASE 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 JDS UNIPHASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and JDS UNIPHASE.
Diversification Opportunities for Microsoft and JDS UNIPHASE
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and JDS is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and JDS UNIPHASE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JDS UNIPHASE 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 JDS UNIPHASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JDS UNIPHASE has no effect on the direction of Microsoft i.e., Microsoft and JDS UNIPHASE go up and down completely randomly.
Pair Corralation between Microsoft and JDS UNIPHASE
Assuming the 90 days trading horizon Microsoft is expected to generate 0.55 times more return on investment than JDS UNIPHASE. However, Microsoft is 1.81 times less risky than JDS UNIPHASE. It trades about 0.25 of its potential returns per unit of risk. JDS UNIPHASE is currently generating about 0.08 per unit of risk. If you would invest 37,427 in Microsoft on September 3, 2024 and sell it today you would earn a total of 2,418 from holding Microsoft or generate 6.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. JDS UNIPHASE
Performance |
| Timeline |
| Microsoft |
| JDS UNIPHASE |
Microsoft and JDS UNIPHASE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and JDS UNIPHASE
The main advantage of trading using opposite Microsoft and JDS UNIPHASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, JDS UNIPHASE 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 JDS UNIPHASE will offset losses from the drop in JDS UNIPHASE's long position.The idea behind Microsoft and JDS UNIPHASE 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.| JDS UNIPHASE vs. Martin Marietta Materials | JDS UNIPHASE vs. Computer And Technologies | JDS UNIPHASE vs. Japan Tobacco | JDS UNIPHASE vs. Plastic Omnium |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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