Correlation Between Microsoft and Jadard Technology

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

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

Diversification Opportunities for Microsoft and Jadard Technology

0.1

Correlation Coefficient

Microsoft  Jadard Technology

Average diversification

The 3 months correlation between Microsoft and Jadard is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Jadard Technology A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jadard Technology 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 Jadard Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jadard Technology has no effect on the direction of Microsoft i.e., Microsoft and Jadard Technology go up and down completely randomly.

Pair Corralation between Microsoft and Jadard Technology

Given the investment horizon of 90 days Microsoft is expected to generate 6.93 times less return on investment than Jadard Technology. But when comparing it to its historical volatility, Microsoft is 2.61 times less risky than Jadard Technology. It trades about 0.02 of its potential returns per unit of risk. Jadard Technology A is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,443  in Jadard Technology A on October 23, 2024 and sell it today you would earn a total of  235.00  from holding Jadard Technology A or generate 9.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Microsoft  vs.  Jadard Technology A

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Jadard Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jadard Technology A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jadard Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Jadard Technology

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

The idea behind Microsoft and Jadard Technology A 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.