Correlation Between Microsoft and Prima Andalan
Can any of the company-specific risk be diversified away by investing in both Microsoft and Prima Andalan 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 Prima Andalan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Prima Andalan Mandiri, you can compare the effects of market volatilities on Microsoft and Prima Andalan 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 Prima Andalan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Prima Andalan.
Diversification Opportunities for Microsoft and Prima Andalan
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Prima is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Prima Andalan Mandiri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prima Andalan Mandiri 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 Prima Andalan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prima Andalan Mandiri has no effect on the direction of Microsoft i.e., Microsoft and Prima Andalan go up and down completely randomly.
Pair Corralation between Microsoft and Prima Andalan
Given the investment horizon of 90 days Microsoft is expected to generate 0.81 times more return on investment than Prima Andalan. However, Microsoft is 1.23 times less risky than Prima Andalan. It trades about 0.07 of its potential returns per unit of risk. Prima Andalan Mandiri is currently generating about 0.01 per unit of risk. If you would invest 30,443 in Microsoft on August 30, 2024 and sell it today you would earn a total of 11,856 from holding Microsoft or generate 38.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.69% |
| Values | Daily Returns |
Microsoft vs. Prima Andalan Mandiri
Performance |
| Timeline |
| Microsoft |
| Prima Andalan Mandiri |
Microsoft and Prima Andalan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Prima Andalan
The main advantage of trading using opposite Microsoft and Prima Andalan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Prima Andalan 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 Prima Andalan will offset losses from the drop in Prima Andalan's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Prima Andalan vs. Baramulti Suksessarana Tbk | Prima Andalan vs. Mitrabara Adiperdana PT | Prima Andalan vs. Adaro Minerals Indonesia | Prima Andalan vs. RMK Energy PT |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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