Correlation Between Microsoft and Telkom Indonesia
Can any of the company-specific risk be diversified away by investing in both Microsoft and Telkom Indonesia 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 Telkom Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Telkom Indonesia Tbk, you can compare the effects of market volatilities on Microsoft and Telkom Indonesia 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 Telkom Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Telkom Indonesia.
Diversification Opportunities for Microsoft and Telkom Indonesia
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Telkom is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Telkom Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom Indonesia 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 Telkom Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom Indonesia Tbk has no effect on the direction of Microsoft i.e., Microsoft and Telkom Indonesia go up and down completely randomly.
Pair Corralation between Microsoft and Telkom Indonesia
Given the investment horizon of 90 days Microsoft is expected to under-perform the Telkom Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 3.26 times less risky than Telkom Indonesia. The stock trades about -0.04 of its potential returns per unit of risk. The Telkom Indonesia Tbk is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Telkom Indonesia Tbk on August 28, 2024 and sell it today you would earn a total of 1.00 from holding Telkom Indonesia Tbk or generate 5.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Telkom Indonesia Tbk
Performance |
| Timeline |
| Microsoft |
| Telkom Indonesia Tbk |
Microsoft and Telkom Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Telkom Indonesia
The main advantage of trading using opposite Microsoft and Telkom Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Telkom Indonesia 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 Telkom Indonesia will offset losses from the drop in Telkom Indonesia's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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