Correlation Between Microsoft and Keck Seng

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

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

Diversification Opportunities for Microsoft and Keck Seng

-0.34

Correlation Coefficient

Microsoft  Keck Seng

Very good diversification

The 3 months correlation between Microsoft and Keck is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Keck Seng Malaysia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keck Seng 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 Keck Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keck Seng Malaysia has no effect on the direction of Microsoft i.e., Microsoft and Keck Seng go up and down completely randomly.

Pair Corralation between Microsoft and Keck Seng

Given the investment horizon of 90 days Microsoft is expected to generate 1.98 times more return on investment than Keck Seng. However, Microsoft is 1.98 times more volatile than Keck Seng Malaysia. It trades about 0.02 of its potential returns per unit of risk. Keck Seng Malaysia is currently generating about -0.09 per unit of risk. If you would invest  43,125  in Microsoft on September 25, 2024 and sell it today you would earn a total of  400.00  from holding Microsoft or generate 0.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Keck Seng Malaysia

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.

Keck Seng Malaysia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keck Seng Malaysia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Keck Seng 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 Keck Seng

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

The idea behind Microsoft and Keck Seng 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.