Correlation Between Microsoft and Jalles Machado

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

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

Diversification Opportunities for Microsoft and Jalles Machado

-0.55

Correlation Coefficient

Microsoft  Jalles Machado

Excellent diversification

The 3 months correlation between Microsoft and Jalles is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Jalles Machado SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jalles Machado SA 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 Jalles Machado. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jalles Machado SA has no effect on the direction of Microsoft i.e., Microsoft and Jalles Machado go up and down completely randomly.

Pair Corralation between Microsoft and Jalles Machado

Given the investment horizon of 90 days Microsoft is expected to generate 0.63 times more return on investment than Jalles Machado. However, Microsoft is 1.59 times less risky than Jalles Machado. It trades about 0.04 of its potential returns per unit of risk. Jalles Machado SA is currently generating about -0.25 per unit of risk. If you would invest  42,717  in Microsoft on September 27, 2024 and sell it today you would earn a total of  1,216  from holding Microsoft or generate 2.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Microsoft  vs.  Jalles Machado SA

Microsoft

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Jalles Machado SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jalles Machado SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and Jalles Machado

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

The idea behind Microsoft and Jalles Machado SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.