Correlation Between James Hardie and Microsoft Corp

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Can any of the company-specific risk be diversified away by investing in both James Hardie and Microsoft Corp 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 James Hardie and Microsoft Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between James Hardie Industries and Microsoft Corp, you can compare the effects of market volatilities on James Hardie and Microsoft Corp 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 James Hardie with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of James Hardie and Microsoft Corp.

Diversification Opportunities for James Hardie and Microsoft Corp

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between James and Microsoft is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding James Hardie Industries and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp and James Hardie 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 James Hardie Industries are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of James Hardie i.e., James Hardie and Microsoft Corp go up and down completely randomly.

Pair Corralation between James Hardie and Microsoft Corp

Considering the 90-day investment horizon James Hardie is expected to generate 2.54 times less return on investment than Microsoft Corp. In addition to that, James Hardie is 1.27 times more volatile than Microsoft Corp. It trades about 0.01 of its total potential returns per unit of risk. Microsoft Corp is currently generating about 0.04 per unit of volatility. If you would invest  24,039  in Microsoft Corp on August 29, 2022 and sell it today you would earn a total of  710.00  from holding Microsoft Corp or generate 2.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

James Hardie Industries  vs.  Microsoft Corp

 Performance (%) 
       Timeline  
James Hardie Industries 
James Performance
0 of 100
Over the last 90 days James Hardie Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest sluggish performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

James Price Channel

Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

James Hardie and Microsoft Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with James Hardie and Microsoft Corp

The main advantage of trading using opposite James Hardie and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if James Hardie position performs unexpectedly, Microsoft Corp 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.
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The idea behind James Hardie Industries and Microsoft Corp 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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