Correlation Between Microsoft and KRAKATAU STEEL
Can any of the company-specific risk be diversified away by investing in both Microsoft and KRAKATAU STEEL 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 KRAKATAU STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and KRAKATAU STEEL B , you can compare the effects of market volatilities on Microsoft and KRAKATAU STEEL 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 KRAKATAU STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and KRAKATAU STEEL.
Diversification Opportunities for Microsoft and KRAKATAU STEEL
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Microsoft and KRAKATAU is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and KRAKATAU STEEL B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRAKATAU STEEL B 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 KRAKATAU STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRAKATAU STEEL B has no effect on the direction of Microsoft i.e., Microsoft and KRAKATAU STEEL go up and down completely randomly.
Pair Corralation between Microsoft and KRAKATAU STEEL
Assuming the 90 days trading horizon Microsoft is expected to generate 213.78 times less return on investment than KRAKATAU STEEL. But when comparing it to its historical volatility, Microsoft is 3.94 times less risky than KRAKATAU STEEL. It trades about 0.0 of its potential returns per unit of risk. KRAKATAU STEEL B is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 0.20 in KRAKATAU STEEL B on September 25, 2024 and sell it today you would earn a total of 0.40 from holding KRAKATAU STEEL B or generate 200.0% 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. KRAKATAU STEEL B
Performance |
| Timeline |
| Microsoft |
| KRAKATAU STEEL B |
Microsoft and KRAKATAU STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and KRAKATAU STEEL
The main advantage of trading using opposite Microsoft and KRAKATAU STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, KRAKATAU STEEL 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 KRAKATAU STEEL will offset losses from the drop in KRAKATAU STEEL's long position.The idea behind Microsoft and KRAKATAU STEEL B 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.| KRAKATAU STEEL vs. BRAGG GAMING GRP | KRAKATAU STEEL vs. Sunny Optical Technology | KRAKATAU STEEL vs. FUTURE GAMING GRP | KRAKATAU STEEL vs. AECOM TECHNOLOGY |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |