Correlation Between Microsoft and Lippo Cikarang

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

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

Diversification Opportunities for Microsoft and Lippo Cikarang

-0.55

Correlation Coefficient

Microsoft  Lippo Cikarang

Excellent diversification

The 3 months correlation between Microsoft and Lippo is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Lippo Cikarang Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lippo Cikarang 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 Lippo Cikarang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lippo Cikarang Tbk has no effect on the direction of Microsoft i.e., Microsoft and Lippo Cikarang go up and down completely randomly.

Pair Corralation between Microsoft and Lippo Cikarang

Given the investment horizon of 90 days Microsoft is expected to generate 0.42 times more return on investment than Lippo Cikarang. However, Microsoft is 2.37 times less risky than Lippo Cikarang. It trades about 0.05 of its potential returns per unit of risk. Lippo Cikarang Tbk is currently generating about -0.19 per unit of risk. If you would invest  43,781  in Microsoft on September 19, 2024 and sell it today you would earn a total of  1,665  from holding Microsoft or generate 3.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Lippo Cikarang Tbk

Microsoft

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 4 (%) 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.

Lippo Cikarang Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lippo Cikarang Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Microsoft and Lippo Cikarang

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

The idea behind Microsoft and Lippo Cikarang 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.