Correlation Between Microsoft and PT Gajah

Can any of the company-specific risk be diversified away by investing in both Microsoft and PT Gajah 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 PT Gajah into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and PT Gajah Tunggal, you can compare the effects of market volatilities on Microsoft and PT Gajah 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 PT Gajah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and PT Gajah.

Diversification Opportunities for Microsoft and PT Gajah

0.42

Correlation Coefficient

Microsoft  PT Gajah

Very weak diversification

The 3 months correlation between Microsoft and GH8 is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PT Gajah Tunggal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Gajah Tunggal 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 PT Gajah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Gajah Tunggal has no effect on the direction of Microsoft i.e., Microsoft and PT Gajah go up and down completely randomly.

Pair Corralation between Microsoft and PT Gajah

Assuming the 90 days trading horizon Microsoft is expected to generate 0.27 times more return on investment than PT Gajah. However, Microsoft is 3.7 times less risky than PT Gajah. It trades about -0.16 of its potential returns per unit of risk. PT Gajah Tunggal is currently generating about -0.06 per unit of risk. If you would invest  42,065  in Microsoft on December 20, 2024 and sell it today you would lose (6,350) from holding Microsoft or give up 15.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Microsoft  vs.  PT Gajah Tunggal

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

PT Gajah Tunggal

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Gajah Tunggal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and PT Gajah

The main advantage of trading using opposite Microsoft and PT Gajah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, PT Gajah 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 PT Gajah will offset losses from the drop in PT Gajah's long position.

The idea behind Microsoft and PT Gajah Tunggal pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.