Correlation Between Microsoft and Jerash Holdings

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

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

Diversification Opportunities for Microsoft and Jerash Holdings

-0.46

Correlation Coefficient

Microsoft  Jerash Holdings

Very good diversification

The 3 months correlation between Microsoft and Jerash is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Jerash Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jerash 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 Jerash Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jerash Holdings has no effect on the direction of Microsoft i.e., Microsoft and Jerash Holdings go up and down completely randomly.

Pair Corralation between Microsoft and Jerash Holdings

Given the investment horizon of 90 days Microsoft is expected to under-perform the Jerash Holdings. In addition to that, Microsoft is 1.02 times more volatile than Jerash Holdings. It trades about -0.11 of its total potential returns per unit of risk. Jerash Holdings is currently generating about 0.04 per unit of volatility. If you would invest  339.00  in Jerash Holdings on December 29, 2024 and sell it today you would earn a total of  10.00  from holding Jerash Holdings or generate 2.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Jerash 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.

Jerash Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jerash Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Jerash Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Microsoft and Jerash Holdings

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

The idea behind Microsoft and Jerash 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.