Correlation Between Microsoft and Indal Aluminium
Can any of the company-specific risk be diversified away by investing in both Microsoft and Indal Aluminium 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 Indal Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Indal Aluminium Industry, you can compare the effects of market volatilities on Microsoft and Indal Aluminium 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 Indal Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Indal Aluminium.
Diversification Opportunities for Microsoft and Indal Aluminium
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Indal is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Indal Aluminium Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indal Aluminium Industry 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 Indal Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indal Aluminium Industry has no effect on the direction of Microsoft i.e., Microsoft and Indal Aluminium go up and down completely randomly.
Pair Corralation between Microsoft and Indal Aluminium
Given the investment horizon of 90 days Microsoft is expected to generate 0.4 times more return on investment than Indal Aluminium. However, Microsoft is 2.52 times less risky than Indal Aluminium. It trades about 0.12 of its potential returns per unit of risk. Indal Aluminium Industry is currently generating about -0.26 per unit of risk. If you would invest 41,879 in Microsoft on October 26, 2024 and sell it today you would earn a total of 2,519 from holding Microsoft or generate 6.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.5% |
| Values | Daily Returns |
Microsoft vs. Indal Aluminium Industry
Performance |
| Timeline |
| Microsoft |
| Indal Aluminium Industry |
Microsoft and Indal Aluminium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Indal Aluminium
The main advantage of trading using opposite Microsoft and Indal Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Indal Aluminium 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 Indal Aluminium will offset losses from the drop in Indal Aluminium's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Indal Aluminium vs. Intanwijaya Internasional Tbk | Indal Aluminium vs. Alumindo Light Metal | Indal Aluminium vs. Champion Pacific Indonesia | Indal Aluminium vs. Betonjaya Manunggal Tbk |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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