Correlation Between Microsoft and JPMorgan Emerging
Can any of the company-specific risk be diversified away by investing in both Microsoft and JPMorgan Emerging 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 JPMorgan Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and JPMorgan Emerging Markets, you can compare the effects of market volatilities on Microsoft and JPMorgan Emerging 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 JPMorgan Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and JPMorgan Emerging.
Diversification Opportunities for Microsoft and JPMorgan Emerging
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and JPMorgan is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and JPMorgan Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Emerging Markets 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 JPMorgan Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Emerging Markets has no effect on the direction of Microsoft i.e., Microsoft and JPMorgan Emerging go up and down completely randomly.
Pair Corralation between Microsoft and JPMorgan Emerging
Given the investment horizon of 90 days Microsoft is expected to generate 1.89 times more return on investment than JPMorgan Emerging. However, Microsoft is 1.89 times more volatile than JPMorgan Emerging Markets. It trades about 0.24 of its potential returns per unit of risk. JPMorgan Emerging Markets is currently generating about 0.04 per unit of risk. If you would invest 40,764 in Microsoft on September 3, 2024 and sell it today you would earn a total of 2,334 from holding Microsoft or generate 5.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Microsoft vs. JPMorgan Emerging Markets
Performance |
| Timeline |
| Microsoft |
| JPMorgan Emerging Markets |
Microsoft and JPMorgan Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and JPMorgan Emerging
The main advantage of trading using opposite Microsoft and JPMorgan Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, JPMorgan Emerging 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 JPMorgan Emerging will offset losses from the drop in JPMorgan Emerging's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| JPMorgan Emerging vs. CATCo Reinsurance Opportunities | JPMorgan Emerging vs. BH Macro Limited | JPMorgan Emerging vs. Legal General Group | JPMorgan Emerging vs. TMT Investments PLC |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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