Correlation Between Microsoft and Bank Mestika

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

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

Diversification Opportunities for Microsoft and Bank Mestika

0.07

Correlation Coefficient

Microsoft  Bank Mestika

Significant diversification

The 3 months correlation between Microsoft and Bank is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Bank Mestika Dharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Mestika Dharma 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 Mestika. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Mestika Dharma has no effect on the direction of Microsoft i.e., Microsoft and Bank Mestika go up and down completely randomly.

Pair Corralation between Microsoft and Bank Mestika

Given the investment horizon of 90 days Microsoft is expected to under-perform the Bank Mestika. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.04 times less risky than Bank Mestika. The stock trades about -0.11 of its potential returns per unit of risk. The Bank Mestika Dharma is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  193,000  in Bank Mestika Dharma on December 30, 2024 and sell it today you would earn a total of  1,500  from holding Bank Mestika Dharma or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Microsoft  vs.  Bank Mestika Dharma

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.

Bank Mestika Dharma

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Mestika Dharma are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bank Mestika 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 Mestika

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

The idea behind Microsoft and Bank Mestika Dharma 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.