Correlation Between Microsoft and BANK RAKYAT
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
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and BANK is -0.43. 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 0.9 times more return on investment than BANK RAKYAT. However, Microsoft is 1.11 times less risky than BANK RAKYAT. It trades about 0.02 of its potential returns per unit of risk. BANK RAKYAT IND is currently generating about -0.22 per unit of risk. If you would invest 39,347 in Microsoft on August 24, 2024 and sell it today you would earn a total of 128.00 from holding Microsoft or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. BANK RAKYAT IND
Performance |
| Timeline |
| Microsoft |
| BANK RAKYAT IND |
Microsoft and BANK RAKYAT Volatility Contrast
Predicted Return Density |
| 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.| Microsoft vs. PENN NATL GAMING | Microsoft vs. DEVRY EDUCATION GRP | Microsoft vs. Perdoceo Education | Microsoft vs. TROPHY GAMES DEV |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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