Correlation Between IShares Fundamental and Microsoft Corp

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

By analyzing existing cross correlation between iShares Fundamental Hedged and Microsoft Corp CDR, you can compare the effects of market volatilities on IShares Fundamental and Microsoft Corp 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 IShares Fundamental with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fundamental and Microsoft Corp.

Diversification Opportunities for IShares Fundamental and Microsoft Corp

0.14

Correlation Coefficient

IShares Fundamental  Microsoft Corp

Average diversification

The 3 months correlation between IShares and Microsoft is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and Microsoft Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp CDR and IShares Fundamental 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 iShares Fundamental Hedged are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp CDR has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and Microsoft Corp go up and down completely randomly.

Pair Corralation between IShares Fundamental and Microsoft Corp

Assuming the 90 days trading horizon IShares Fundamental is expected to generate 7.86 times less return on investment than Microsoft Corp. But when comparing it to its historical volatility, iShares Fundamental Hedged is 1.75 times less risky than Microsoft Corp. It trades about 0.0 of its potential returns per unit of risk. Microsoft Corp CDR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,173  in Microsoft Corp CDR on September 23, 2024 and sell it today you would earn a total of  17.00  from holding Microsoft Corp CDR or generate 0.54% return on investment over 90 days.

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

iShares Fundamental Hedged  vs.  Microsoft Corp CDR

iShares Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Fundamental Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Fundamental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Microsoft Corp CDR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp CDR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Fundamental and Microsoft Corp

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

The idea behind iShares Fundamental Hedged and Microsoft Corp CDR 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.