Correlation Between Microsoft and IShares Public

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

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

Diversification Opportunities for Microsoft and IShares Public

-0.54

Correlation Coefficient

Microsoft  IShares Public

Excellent diversification

The 3 months correlation between Microsoft and IShares is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares Public Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Public 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 IShares Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Public has no effect on the direction of Microsoft i.e., Microsoft and IShares Public go up and down completely randomly.

Pair Corralation between Microsoft and IShares Public

Given the investment horizon of 90 days Microsoft is expected to generate 0.93 times more return on investment than IShares Public. However, Microsoft is 1.08 times less risky than IShares Public. It trades about 0.02 of its potential returns per unit of risk. iShares Public Limited is currently generating about -0.11 per unit of risk. If you would invest  43,264  in Microsoft on September 23, 2024 and sell it today you would earn a total of  396.00  from holding Microsoft or generate 0.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Microsoft  vs.  iShares Public Limited

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.

iShares Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Public Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Microsoft and IShares Public

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

The idea behind Microsoft and iShares Public Limited 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.