Correlation Between Microsoft and JD Health
Can any of the company-specific risk be diversified away by investing in both Microsoft and JD Health 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 JD Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and JD Health International, you can compare the effects of market volatilities on Microsoft and JD Health 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 JD Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and JD Health.
Diversification Opportunities for Microsoft and JD Health
Significant diversification
The 3 months correlation between Microsoft and JDHIY is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and JD Health International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Health International 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 JD Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Health International has no effect on the direction of Microsoft i.e., Microsoft and JD Health go up and down completely randomly.
Pair Corralation between Microsoft and JD Health
Given the investment horizon of 90 days Microsoft is expected to generate 0.66 times more return on investment than JD Health. However, Microsoft is 1.52 times less risky than JD Health. It trades about 0.08 of its potential returns per unit of risk. JD Health International is currently generating about -0.09 per unit of risk. If you would invest 25,277 in Microsoft on September 3, 2024 and sell it today you would earn a total of 17,069 from holding Microsoft or generate 67.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. JD Health International
Performance |
| Timeline |
| Microsoft |
| JD Health International |
Microsoft and JD Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and JD Health
The main advantage of trading using opposite Microsoft and JD Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, JD Health 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 JD Health will offset losses from the drop in JD Health's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| JD Health vs. Pennant Group | JD Health vs. Encompass Health Corp | JD Health vs. Enhabit | JD Health vs. Concord Medical Services |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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