Correlation Between Microsoft and HEXINDO ADIPERKASA

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

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

Diversification Opportunities for Microsoft and HEXINDO ADIPERKASA

-0.72

Correlation Coefficient

Microsoft  HEXINDO ADIPERKASA

Pay attention - limited upside

The 3 months correlation between Microsoft and HEXINDO is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and HEXINDO ADIPERKASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEXINDO ADIPERKASA 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 HEXINDO ADIPERKASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEXINDO ADIPERKASA has no effect on the direction of Microsoft i.e., Microsoft and HEXINDO ADIPERKASA go up and down completely randomly.

Pair Corralation between Microsoft and HEXINDO ADIPERKASA

Assuming the 90 days trading horizon Microsoft is expected to generate 1.2 times more return on investment than HEXINDO ADIPERKASA. However, Microsoft is 1.2 times more volatile than HEXINDO ADIPERKASA. It trades about 0.09 of its potential returns per unit of risk. HEXINDO ADIPERKASA is currently generating about 0.01 per unit of risk. If you would invest  21,631  in Microsoft on October 4, 2024 and sell it today you would earn a total of  19,369  from holding Microsoft or generate 89.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  HEXINDO ADIPERKASA

Microsoft

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

HEXINDO ADIPERKASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEXINDO ADIPERKASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Microsoft and HEXINDO ADIPERKASA

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

The idea behind Microsoft and HEXINDO ADIPERKASA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.