Correlation Between Microsoft and IShares 0

Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares 0 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 0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and iShares 0 3 Month, you can compare the effects of market volatilities on Microsoft and IShares 0 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 0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares 0.

Diversification Opportunities for Microsoft and IShares 0

0.15

Correlation Coefficient

Microsoft  IShares 0

Average diversification

The 3 months correlation between Microsoft and IShares is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares 0 3 Month in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 0 3 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 0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 0 3 has no effect on the direction of Microsoft i.e., Microsoft and IShares 0 go up and down completely randomly.

Pair Corralation between Microsoft and IShares 0

Given the investment horizon of 90 days Microsoft is expected to generate 5.3 times more return on investment than IShares 0. However, Microsoft is 5.3 times more volatile than iShares 0 3 Month. It trades about 0.05 of its potential returns per unit of risk. iShares 0 3 Month is currently generating about 0.09 per unit of risk. If you would invest  41,435  in Microsoft on March 13, 2024 and sell it today you would earn a total of  1,352  from holding Microsoft or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  iShares 0 3 Month

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares 0 3

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 0 3 Month are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares 0 is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Microsoft and IShares 0

The main advantage of trading using opposite Microsoft and IShares 0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares 0 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 0 will offset losses from the drop in IShares 0's long position.

The idea behind Microsoft and iShares 0 3 Month 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.