Correlation Between Microsoft and JAR
Can any of the company-specific risk be diversified away by investing in both Microsoft and JAR 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 JAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and JAR, you can compare the effects of market volatilities on Microsoft and JAR 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 JAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and JAR.
Diversification Opportunities for Microsoft and JAR
Weak diversification
The 3 months correlation between Microsoft and JAR is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and JAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAR 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 JAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAR has no effect on the direction of Microsoft i.e., Microsoft and JAR go up and down completely randomly.
Pair Corralation between Microsoft and JAR
Given the investment horizon of 90 days Microsoft is expected to generate 1.24 times more return on investment than JAR. However, Microsoft is 1.24 times more volatile than JAR. It trades about -0.11 of its potential returns per unit of risk. JAR is currently generating about -0.19 per unit of risk. If you would invest 42,903 in Microsoft on November 18, 2024 and sell it today you would lose (2,060) from holding Microsoft or give up 4.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. JAR
Performance |
| Timeline |
| Microsoft |
| JAR |
Microsoft and JAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and JAR
The main advantage of trading using opposite Microsoft and JAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, JAR 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 JAR will offset losses from the drop in JAR's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |