Correlation Between Microsoft and KIM KINDEX

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

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

Diversification Opportunities for Microsoft and KIM KINDEX

0.32

Correlation Coefficient

Microsoft  KIM KINDEX

Weak diversification

The 3 months correlation between Microsoft and KIM is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and KIM KINDEX Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIM KINDEX Japan 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 KIM KINDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIM KINDEX Japan has no effect on the direction of Microsoft i.e., Microsoft and KIM KINDEX go up and down completely randomly.

Pair Corralation between Microsoft and KIM KINDEX

Given the investment horizon of 90 days Microsoft is expected to under-perform the KIM KINDEX. In addition to that, Microsoft is 1.07 times more volatile than KIM KINDEX Japan. It trades about -0.29 of its total potential returns per unit of risk. KIM KINDEX Japan is currently generating about -0.07 per unit of volatility. If you would invest  2,827,000  in KIM KINDEX Japan on October 13, 2024 and sell it today you would lose (42,000) from holding KIM KINDEX Japan or give up 1.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Microsoft  vs.  KIM KINDEX Japan

Microsoft

Risk-Adjusted Performance

0 of 100

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 comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

KIM KINDEX Japan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KIM KINDEX Japan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KIM KINDEX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and KIM KINDEX

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

The idea behind Microsoft and KIM KINDEX Japan 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.