Correlation Between Microsoft and PT Astra

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

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

Diversification Opportunities for Microsoft and PT Astra

0.39

Correlation Coefficient

Microsoft  PT Astra

Weak diversification

The 3 months correlation between Microsoft and ASII is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PT Astra International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Astra International 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 Astra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Astra International has no effect on the direction of Microsoft i.e., Microsoft and PT Astra go up and down completely randomly.

Pair Corralation between Microsoft and PT Astra

Given the investment horizon of 90 days Microsoft is expected to under-perform the PT Astra. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 11.07 times less risky than PT Astra. The stock trades about -0.08 of its potential returns per unit of risk. The PT Astra International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.06  in PT Astra International on December 2, 2024 and sell it today you would lose (0.02) from holding PT Astra International or give up 33.33% of portfolio value over 90 days.

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

Microsoft  vs.  PT Astra International

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

PT Astra International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Astra International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, PT Astra demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and PT Astra

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

The idea behind Microsoft and PT Astra International 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.