Correlation Between MicroStrategy Incorporated and Japan Exchange

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

By analyzing existing cross correlation between MicroStrategy Incorporated and Japan Exchange Group, you can compare the effects of market volatilities on MicroStrategy Incorporated and Japan Exchange 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 MicroStrategy Incorporated with a short position of Japan Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroStrategy Incorporated and Japan Exchange.

Diversification Opportunities for MicroStrategy Incorporated and Japan Exchange

-0.44

Correlation Coefficient

MicroStrategy Incorporated  Japan Exchange

Very good diversification

The 3 months correlation between MicroStrategy and Japan is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding MicroStrategy Incorporated and Japan Exchange Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Exchange Group and MicroStrategy Incorporated 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 MicroStrategy Incorporated are associated (or correlated) with Japan Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Exchange Group has no effect on the direction of MicroStrategy Incorporated i.e., MicroStrategy Incorporated and Japan Exchange go up and down completely randomly.

Pair Corralation between MicroStrategy Incorporated and Japan Exchange

Given the investment horizon of 90 days MicroStrategy Incorporated is expected to under-perform the Japan Exchange. In addition to that, MicroStrategy Incorporated is 4.08 times more volatile than Japan Exchange Group. It trades about -0.1 of its total potential returns per unit of risk. Japan Exchange Group is currently generating about -0.07 per unit of volatility. If you would invest  1,165  in Japan Exchange Group on September 24, 2024 and sell it today you would lose (33.00) from holding Japan Exchange Group or give up 2.83% of portfolio value over 90 days.

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

MicroStrategy Incorporated  vs.  Japan Exchange Group

MicroStrategy Incorporated

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, MicroStrategy Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Japan Exchange Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Exchange Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with MicroStrategy Incorporated and Japan Exchange

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

The idea behind MicroStrategy Incorporated and Japan Exchange Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.