Correlation Between Microsoft and Bank Islam

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

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

Diversification Opportunities for Microsoft and Bank Islam

-0.62

Correlation Coefficient

Microsoft  Bank Islam

Excellent diversification

The 3 months correlation between Microsoft and Bank is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Bank Islam Malaysia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Islam Malaysia 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 Bank Islam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Islam Malaysia has no effect on the direction of Microsoft i.e., Microsoft and Bank Islam go up and down completely randomly.

Pair Corralation between Microsoft and Bank Islam

Given the investment horizon of 90 days Microsoft is expected to generate 1.2 times more return on investment than Bank Islam. However, Microsoft is 1.2 times more volatile than Bank Islam Malaysia. It trades about 0.03 of its potential returns per unit of risk. Bank Islam Malaysia is currently generating about -0.05 per unit of risk. If you would invest  41,388  in Microsoft on October 8, 2024 and sell it today you would earn a total of  947.00  from holding Microsoft or generate 2.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Microsoft  vs.  Bank Islam Malaysia

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Bank Islam Malaysia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Islam Malaysia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Bank Islam is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Microsoft and Bank Islam

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

The idea behind Microsoft and Bank Islam Malaysia 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.