Correlation Between Microsoft and JD

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

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

Diversification Opportunities for Microsoft and JD

-0.27

Correlation Coefficient

Microsoft  JD

Very good diversification

The 3 months correlation between Microsoft and JD is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and JD Inc Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc Adr 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 JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc Adr has no effect on the direction of Microsoft i.e., Microsoft and JD go up and down completely randomly.

Pair Corralation between Microsoft and JD

Given the investment horizon of 90 days Microsoft is expected to generate 0.36 times more return on investment than JD. However, Microsoft is 2.76 times less risky than JD. It trades about 0.39 of its potential returns per unit of risk. JD Inc Adr is currently generating about -0.01 per unit of risk. If you would invest  42,462  in Microsoft on May 1, 2025 and sell it today you would earn a total of  8,862  from holding Microsoft or generate 20.87% return on investment over 90 days.

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

Microsoft  vs.  JD Inc Adr

Microsoft

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

JD Inc Adr

Risk-Adjusted Performance

Very Weak

Over the last 90 days JD Inc Adr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, JD is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Microsoft and JD

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

The idea behind Microsoft and JD Inc Adr 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.