Correlation Between Microsoft and Ijj

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

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

Diversification Opportunities for Microsoft and Ijj

0.47

Correlation Coefficient

Microsoft  Ijj

Very weak diversification

The 3 months correlation between Microsoft and Ijj is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ijj Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ijj Corporation 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 Ijj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ijj Corporation has no effect on the direction of Microsoft i.e., Microsoft and Ijj go up and down completely randomly.

Pair Corralation between Microsoft and Ijj

Given the investment horizon of 90 days Microsoft is expected to under-perform the Ijj. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 12.53 times less risky than Ijj. The stock trades about -0.11 of its potential returns per unit of risk. The Ijj Corporation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Ijj Corporation on December 28, 2024 and sell it today you would lose (0.02) from holding Ijj Corporation or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Microsoft  vs.  Ijj Corp.

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ijj Corporation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ijj Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward-looking indicators, Ijj reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Ijj

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

The idea behind Microsoft and Ijj Corporation 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.