Correlation Between Microsoft and J Sainsbury
Can any of the company-specific risk be diversified away by investing in both Microsoft and J Sainsbury 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 J Sainsbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and J Sainsbury plc, you can compare the effects of market volatilities on Microsoft and J Sainsbury 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 J Sainsbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and J Sainsbury.
Diversification Opportunities for Microsoft and J Sainsbury
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and JSNSF is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and J Sainsbury plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Sainsbury plc 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 J Sainsbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Sainsbury plc has no effect on the direction of Microsoft i.e., Microsoft and J Sainsbury go up and down completely randomly.
Pair Corralation between Microsoft and J Sainsbury
Given the investment horizon of 90 days Microsoft is expected to generate 1.01 times less return on investment than J Sainsbury. But when comparing it to its historical volatility, Microsoft is 4.37 times less risky than J Sainsbury. It trades about 0.36 of its potential returns per unit of risk. J Sainsbury plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 362.00 in J Sainsbury plc on April 25, 2025 and sell it today you would earn a total of 75.00 from holding J Sainsbury plc or generate 20.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.39% |
Values | Daily Returns |
Microsoft vs. J Sainsbury plc
Performance |
Timeline |
Microsoft |
J Sainsbury plc |
Microsoft and J Sainsbury Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Microsoft and J Sainsbury
The main advantage of trading using opposite Microsoft and J Sainsbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, J Sainsbury 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 J Sainsbury will offset losses from the drop in J Sainsbury's long position.Microsoft vs. Palantir Technologies Class | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Oracle | Microsoft vs. CoreWeave, Class A |
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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 the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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