Correlation Between Microsoft and Midi Utama
Can any of the company-specific risk be diversified away by investing in both Microsoft and Midi Utama 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 Midi Utama into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Midi Utama Indonesia, you can compare the effects of market volatilities on Microsoft and Midi Utama 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 Midi Utama. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Midi Utama.
Diversification Opportunities for Microsoft and Midi Utama
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Midi is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Midi Utama Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midi Utama Indonesia 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 Midi Utama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midi Utama Indonesia has no effect on the direction of Microsoft i.e., Microsoft and Midi Utama go up and down completely randomly.
Pair Corralation between Microsoft and Midi Utama
Given the investment horizon of 90 days Microsoft is expected to generate 0.78 times more return on investment than Midi Utama. However, Microsoft is 1.28 times less risky than Midi Utama. It trades about 0.17 of its potential returns per unit of risk. Midi Utama Indonesia is currently generating about -0.35 per unit of risk. If you would invest 40,764 in Microsoft on September 3, 2024 and sell it today you would earn a total of 1,582 from holding Microsoft or generate 3.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Midi Utama Indonesia
Performance |
| Timeline |
| Microsoft |
| Midi Utama Indonesia |
Microsoft and Midi Utama Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Midi Utama
The main advantage of trading using opposite Microsoft and Midi Utama positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Midi Utama 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 Midi Utama will offset losses from the drop in Midi Utama'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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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