Correlation Between Microsoft and Cikarang Listrindo

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

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

Diversification Opportunities for Microsoft and Cikarang Listrindo

0.38

Correlation Coefficient

Microsoft  Cikarang Listrindo

Weak diversification

The 3 months correlation between Microsoft and Cikarang is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Cikarang Listrindo Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cikarang Listrindo Tbk 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 Cikarang Listrindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cikarang Listrindo Tbk has no effect on the direction of Microsoft i.e., Microsoft and Cikarang Listrindo go up and down completely randomly.

Pair Corralation between Microsoft and Cikarang Listrindo

Given the investment horizon of 90 days Microsoft is expected to generate 1.52 times more return on investment than Cikarang Listrindo. However, Microsoft is 1.52 times more volatile than Cikarang Listrindo Tbk. It trades about -0.01 of its potential returns per unit of risk. Cikarang Listrindo Tbk is currently generating about -0.02 per unit of risk. If you would invest  41,466  in Microsoft on November 20, 2024 and sell it today you would lose (623.00) from holding Microsoft or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.92%
Values	Daily Returns

Microsoft  vs.  Cikarang Listrindo Tbk

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 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.

Cikarang Listrindo Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cikarang Listrindo Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Cikarang Listrindo 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 Cikarang Listrindo

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

The idea behind Microsoft and Cikarang Listrindo Tbk 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.