Correlation Between Microsoft and PT Barito

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

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

Diversification Opportunities for Microsoft and PT Barito

-0.12

Correlation Coefficient

Microsoft  PT Barito

Good diversification

The 3 months correlation between Microsoft and OB8 is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and PT Barito Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Barito Pacific 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 Barito. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Barito Pacific has no effect on the direction of Microsoft i.e., Microsoft and PT Barito go up and down completely randomly.

Pair Corralation between Microsoft and PT Barito

Given the investment horizon of 90 days Microsoft is expected to under-perform the PT Barito. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 4.69 times less risky than PT Barito. The stock trades about -0.01 of its potential returns per unit of risk. The PT Barito Pacific is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.49  in PT Barito Pacific on September 23, 2024 and sell it today you would lose (0.59) from holding PT Barito Pacific or give up 13.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.69%
Values	Daily Returns

Microsoft  vs.  PT Barito Pacific

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

PT Barito Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Barito Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Microsoft and PT Barito

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

The idea behind Microsoft and PT Barito Pacific 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.