Correlation Between Microsoft and INDOFOOD AGRI
Can any of the company-specific risk be diversified away by investing in both Microsoft and INDOFOOD AGRI 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 INDOFOOD AGRI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and INDOFOOD AGRI RES, you can compare the effects of market volatilities on Microsoft and INDOFOOD AGRI 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 INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and INDOFOOD AGRI.
Diversification Opportunities for Microsoft and INDOFOOD AGRI
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and INDOFOOD is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES 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 INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of Microsoft i.e., Microsoft and INDOFOOD AGRI go up and down completely randomly.
Pair Corralation between Microsoft and INDOFOOD AGRI
If you would invest 39,197 in Microsoft on September 21, 2024 and sell it today you would earn a total of 3,013 from holding Microsoft or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. INDOFOOD AGRI RES
Performance |
| Timeline |
| Microsoft |
| INDOFOOD AGRI RES |
Microsoft and INDOFOOD AGRI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and INDOFOOD AGRI
The main advantage of trading using opposite Microsoft and INDOFOOD AGRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, INDOFOOD AGRI 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 INDOFOOD AGRI will offset losses from the drop in INDOFOOD AGRI's long position.The idea behind Microsoft and INDOFOOD AGRI RES 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.| INDOFOOD AGRI vs. ePlay Digital | INDOFOOD AGRI vs. WIMFARM SA EO | INDOFOOD AGRI vs. PLAYMATES TOYS | INDOFOOD AGRI vs. Sumitomo Mitsui Construction |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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