Correlation Between Microsoft and IncomeShares Apple

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

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

Diversification Opportunities for Microsoft and IncomeShares Apple

0.8

Correlation Coefficient

Microsoft  IncomeShares Apple

Very poor diversification

The 3 months correlation between Microsoft and IncomeShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and IncomeShares Apple Options in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares Apple 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 IncomeShares Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares Apple has no effect on the direction of Microsoft i.e., Microsoft and IncomeShares Apple go up and down completely randomly.

Pair Corralation between Microsoft and IncomeShares Apple

Given the investment horizon of 90 days Microsoft is expected to generate 13.3 times less return on investment than IncomeShares Apple. In addition to that, Microsoft is 1.51 times more volatile than IncomeShares Apple Options. It trades about 0.01 of its total potential returns per unit of risk. IncomeShares Apple Options is currently generating about 0.19 per unit of volatility. If you would invest  1,006  in IncomeShares Apple Options on September 30, 2024 and sell it today you would earn a total of  113.00  from holding IncomeShares Apple Options or generate 11.23% return on investment over 90 days.

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

Microsoft  vs.  IncomeShares Apple Options

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.

IncomeShares Apple

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IncomeShares Apple Options are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, IncomeShares Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Microsoft and IncomeShares Apple

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

The idea behind Microsoft and IncomeShares Apple Options 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.