Correlation Between Microsoft and Jin Air

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

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

Diversification Opportunities for Microsoft and Jin Air

-0.13

Correlation Coefficient

Microsoft  Jin Air

Good diversification

The 3 months correlation between Microsoft and Jin is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Jin Air Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jin Air 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 Jin Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jin Air has no effect on the direction of Microsoft i.e., Microsoft and Jin Air go up and down completely randomly.

Pair Corralation between Microsoft and Jin Air

Given the investment horizon of 90 days Microsoft is expected to generate 1.39 times less return on investment than Jin Air. But when comparing it to its historical volatility, Microsoft is 3.15 times less risky than Jin Air. It trades about 0.19 of its potential returns per unit of risk. Jin Air Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,119,000  in Jin Air Co on September 1, 2024 and sell it today you would earn a total of  59,000  from holding Jin Air Co or generate 5.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Microsoft  vs.  Jin Air Co

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.

Jin Air

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jin Air Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jin Air may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Microsoft and Jin Air

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

The idea behind Microsoft and Jin Air Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.