Correlation Between Microsoft and Judo Capital

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

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

Diversification Opportunities for Microsoft and Judo Capital

0.09

Correlation Coefficient

Microsoft  Judo Capital

Significant diversification

The 3 months correlation between Microsoft and Judo is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Judo Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Judo Capital Holdings 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 Judo Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Judo Capital Holdings has no effect on the direction of Microsoft i.e., Microsoft and Judo Capital go up and down completely randomly.

Pair Corralation between Microsoft and Judo Capital

Given the investment horizon of 90 days Microsoft is expected to under-perform the Judo Capital. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.28 times less risky than Judo Capital. The stock trades about -0.11 of its potential returns per unit of risk. The Judo Capital Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Judo Capital Holdings on December 29, 2024 and sell it today you would earn a total of  2.00  from holding Judo Capital Holdings or generate 1.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Microsoft  vs.  Judo Capital Holdings

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.

Judo Capital Holdings

Risk-Adjusted Performance

Weak

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

Pair Trading with Microsoft and Judo Capital

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

The idea behind Microsoft and Judo Capital Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.