Correlation Between Microsoft and Construction JSC

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

By analyzing existing cross correlation between Microsoft and Construction JSC N0, you can compare the effects of market volatilities on Microsoft and Construction JSC 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 Construction JSC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Construction JSC.

Diversification Opportunities for Microsoft and Construction JSC

-0.42

Correlation Coefficient

Microsoft  Construction JSC

Very good diversification

The 3 months correlation between Microsoft and Construction is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Construction JSC N0 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construction JSC 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 Construction JSC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construction JSC has no effect on the direction of Microsoft i.e., Microsoft and Construction JSC go up and down completely randomly.

Pair Corralation between Microsoft and Construction JSC

Given the investment horizon of 90 days Microsoft is expected to generate 4.93 times less return on investment than Construction JSC. But when comparing it to its historical volatility, Microsoft is 4.19 times less risky than Construction JSC. It trades about 0.01 of its potential returns per unit of risk. Construction JSC N0 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  880,000  in Construction JSC N0 on September 30, 2024 and sell it today you would lose (30,000) from holding Construction JSC N0 or give up 3.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	60.94%
Values	Daily Returns

Microsoft  vs.  Construction JSC N0

Microsoft

Risk-Adjusted Performance

0 of 100

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 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.

Construction JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Construction JSC N0 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Construction JSC is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Construction JSC

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

The idea behind Microsoft and Construction JSC N0 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.