Correlation Between Microsoft and PT Charoen
Can any of the company-specific risk be diversified away by investing in both Microsoft and PT Charoen 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 PT Charoen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and PT Charoen Pokphand, you can compare the effects of market volatilities on Microsoft and PT Charoen 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 PT Charoen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PT Charoen.
Diversification Opportunities for Microsoft and PT Charoen
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and 0CP1 is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PT Charoen Pokphand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Charoen Pokphand 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 PT Charoen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Charoen Pokphand has no effect on the direction of Microsoft i.e., Microsoft and PT Charoen go up and down completely randomly.
Pair Corralation between Microsoft and PT Charoen
Given the investment horizon of 90 days Microsoft is expected to generate 0.46 times more return on investment than PT Charoen. However, Microsoft is 2.17 times less risky than PT Charoen. It trades about 0.09 of its potential returns per unit of risk. PT Charoen Pokphand is currently generating about 0.0 per unit of risk. If you would invest 23,571 in Microsoft on September 24, 2024 and sell it today you would earn a total of 20,089 from holding Microsoft or generate 85.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.42% |
| Values | Daily Returns |
Microsoft vs. PT Charoen Pokphand
Performance |
| Timeline |
| Microsoft |
| PT Charoen Pokphand |
Microsoft and PT Charoen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and PT Charoen
The main advantage of trading using opposite Microsoft and PT Charoen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PT Charoen 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 PT Charoen will offset losses from the drop in PT Charoen's long position.| Microsoft vs. BlackBerry | Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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