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

0.1

Correlation Coefficient

Microsoft  Judo Capital

Average diversification

The 3 months correlation between Microsoft and Judo is 0.1. 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 generate 1.0 times more return on investment than Judo Capital. However, Microsoft is 1.0 times more volatile than Judo Capital Holdings. It trades about 0.2 of its potential returns per unit of risk. Judo Capital Holdings is currently generating about -0.39 per unit of risk. If you would invest  41,466  in Microsoft on September 21, 2024 and sell it today you would earn a total of  2,194  from holding Microsoft or generate 5.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Microsoft  vs.  Judo Capital Holdings

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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.

Judo Capital Holdings

Risk-Adjusted Performance

1 of 100

Insignificant

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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.