Correlation Between Microsoft and Eratex Djaja
Can any of the company-specific risk be diversified away by investing in both Microsoft and Eratex Djaja 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 Eratex Djaja into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Eratex Djaja Tbk, you can compare the effects of market volatilities on Microsoft and Eratex Djaja 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 Eratex Djaja. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Eratex Djaja.
Diversification Opportunities for Microsoft and Eratex Djaja
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Eratex is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Eratex Djaja Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eratex Djaja Tbk 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 Eratex Djaja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eratex Djaja Tbk has no effect on the direction of Microsoft i.e., Microsoft and Eratex Djaja go up and down completely randomly.
Pair Corralation between Microsoft and Eratex Djaja
Given the investment horizon of 90 days Microsoft is expected to generate 4.32 times less return on investment than Eratex Djaja. But when comparing it to its historical volatility, Microsoft is 7.43 times less risky than Eratex Djaja. It trades about 0.19 of its potential returns per unit of risk. Eratex Djaja Tbk is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 8,900 in Eratex Djaja Tbk on September 1, 2024 and sell it today you would earn a total of 1,300 from holding Eratex Djaja Tbk or generate 14.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. Eratex Djaja Tbk
Performance |
| Timeline |
| Microsoft |
| Eratex Djaja Tbk |
Microsoft and Eratex Djaja Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Eratex Djaja
The main advantage of trading using opposite Microsoft and Eratex Djaja positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Eratex Djaja 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 Eratex Djaja will offset losses from the drop in Eratex Djaja's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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