Correlation Between Microsoft and JLF INVESTMENT

Can any of the company-specific risk be diversified away by investing in both Microsoft and JLF INVESTMENT 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 JLF INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and JLF INVESTMENT, you can compare the effects of market volatilities on Microsoft and JLF INVESTMENT 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 JLF INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and JLF INVESTMENT.

Diversification Opportunities for Microsoft and JLF INVESTMENT

0.0

Correlation Coefficient

Microsoft  JLF INVESTMENT

Pay attention - limited upside

The 3 months correlation between Microsoft and JLF is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and JLF INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JLF INVESTMENT 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 JLF INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JLF INVESTMENT has no effect on the direction of Microsoft i.e., Microsoft and JLF INVESTMENT go up and down completely randomly.

Pair Corralation between Microsoft and JLF INVESTMENT

Assuming the 90 days trading horizon Microsoft is expected to generate 0.48 times more return on investment than JLF INVESTMENT. However, Microsoft is 2.09 times less risky than JLF INVESTMENT. It trades about 0.11 of its potential returns per unit of risk. JLF INVESTMENT is currently generating about -0.04 per unit of risk. If you would invest  20,752  in Microsoft on September 26, 2024 and sell it today you would earn a total of  21,213  from holding Microsoft or generate 102.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  JLF INVESTMENT

Microsoft

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JLF INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JLF INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, JLF INVESTMENT is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and JLF INVESTMENT

The main advantage of trading using opposite Microsoft and JLF INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, JLF INVESTMENT 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 JLF INVESTMENT will offset losses from the drop in JLF INVESTMENT's long position.

The idea behind Microsoft and JLF INVESTMENT 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.