Correlation Between Microsoft and Yakult Honsha

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

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

Diversification Opportunities for Microsoft and Yakult Honsha

0.0

Correlation Coefficient

Microsoft  Yakult Honsha

Pay attention - limited upside

The 3 months correlation between Microsoft and Yakult is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Yakult Honsha CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yakult Honsha CoLtd 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 Yakult Honsha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yakult Honsha CoLtd has no effect on the direction of Microsoft i.e., Microsoft and Yakult Honsha go up and down completely randomly.

Pair Corralation between Microsoft and Yakult Honsha

Given the investment horizon of 90 days Microsoft is expected to generate 4.02 times less return on investment than Yakult Honsha. But when comparing it to its historical volatility, Microsoft is 1.33 times less risky than Yakult Honsha. It trades about 0.02 of its potential returns per unit of risk. Yakult Honsha CoLtd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,680  in Yakult Honsha CoLtd on September 2, 2024 and sell it today you would earn a total of  200.00  from holding Yakult Honsha CoLtd or generate 11.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Microsoft  vs.  Yakult Honsha CoLtd

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Yakult Honsha CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yakult Honsha CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Yakult Honsha is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Microsoft and Yakult Honsha

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

The idea behind Microsoft and Yakult Honsha CoLtd 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.