Correlation Between Microsoft and Dana Brata

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

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

Diversification Opportunities for Microsoft and Dana Brata

-0.03

Correlation Coefficient

Microsoft  Dana Brata

Good diversification

The 3 months correlation between Microsoft and Dana is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Dana Brata Luhur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Brata Luhur 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 Dana Brata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Brata Luhur has no effect on the direction of Microsoft i.e., Microsoft and Dana Brata go up and down completely randomly.

Pair Corralation between Microsoft and Dana Brata

Given the investment horizon of 90 days Microsoft is expected to generate 1.41 times more return on investment than Dana Brata. However, Microsoft is 1.41 times more volatile than Dana Brata Luhur. It trades about 0.01 of its potential returns per unit of risk. Dana Brata Luhur is currently generating about -0.08 per unit of risk. If you would invest  43,781  in Microsoft on September 19, 2024 and sell it today you would lose (42.00) from holding Microsoft or give up 0.1% of portfolio value over 90 days.

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

Microsoft  vs.  Dana Brata Luhur

Microsoft

Risk-Adjusted Performance

0 of 100

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Dana Brata Luhur

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Microsoft and Dana Brata Luhur 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.