Correlation Between Microsoft and BANK RAKYAT

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

Diversification Opportunities for Microsoft and BANK RAKYAT

MicrosoftBANKDiversified AwayMicrosoftBANKDiversified Away100%
-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between Microsoft and BANK is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and BANK RAKYAT IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK RAKYAT IND 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 BANK RAKYAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK RAKYAT IND has no effect on the direction of Microsoft i.e., Microsoft and BANK RAKYAT go up and down completely randomly.

Pair Corralation between Microsoft and BANK RAKYAT

Assuming the 90 days trading horizon Microsoft is expected to generate 1.01 times more return on investment than BANK RAKYAT. However, Microsoft is 1.01 times more volatile than BANK RAKYAT IND. It trades about -0.12 of its potential returns per unit of risk. BANK RAKYAT IND is currently generating about -0.17 per unit of risk. If you would invest  41,500  in Microsoft on November 19, 2024 and sell it today you would lose (2,740) from holding Microsoft or give up 6.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft  vs.  BANK RAKYAT IND

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50510
JavaScript chart by amCharts 3.21.15MSF BYRA
       Timeline  
Microsoft 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb390400410420430
BANK RAKYAT IND 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days BANK RAKYAT IND 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 sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.210.2150.220.2250.230.2350.240.2450.25

Microsoft and BANK RAKYAT Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.62-1.96-1.3-0.65-0.010.641.291.952.6 0.060.080.100.120.14
JavaScript chart by amCharts 3.21.15MSF BYRA
       Returns  

Pair Trading with Microsoft and BANK RAKYAT

The main advantage of trading using opposite Microsoft and BANK RAKYAT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, BANK RAKYAT 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 BANK RAKYAT will offset losses from the drop in BANK RAKYAT's long position.
The idea behind Microsoft and BANK RAKYAT IND 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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