Correlation Between IGM Financial and Microsoft Corp
Can any of the company-specific risk be diversified away by investing in both IGM Financial 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 IGM Financial and Microsoft Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IGM Financial and Microsoft Corp CDR, you can compare the effects of market volatilities on IGM Financial 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 IGM Financial with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of IGM Financial and Microsoft Corp.
Diversification Opportunities for IGM Financial and Microsoft Corp
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IGM and Microsoft is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding IGM Financial 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 IGM Financial 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 IGM Financial 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 IGM Financial i.e., IGM Financial and Microsoft Corp go up and down completely randomly.
Pair Corralation between IGM Financial and Microsoft Corp
Assuming the 90 days trading horizon IGM Financial is expected to under-perform the Microsoft Corp. But the stock apears to be less risky and, when comparing its historical volatility, IGM Financial is 1.1 times less risky than Microsoft Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Microsoft Corp CDR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,206 in Microsoft Corp CDR on October 25, 2024 and sell it today you would earn a total of 51.00 from holding Microsoft Corp CDR or generate 1.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IGM Financial vs. Microsoft Corp CDR
Performance |
| Timeline |
| IGM Financial |
| Microsoft Corp CDR |
IGM Financial and Microsoft Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IGM Financial and Microsoft Corp
The main advantage of trading using opposite IGM Financial and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGM Financial 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.| IGM Financial vs. CI Financial Corp | IGM Financial vs. Great West Lifeco | IGM Financial vs. iA Financial | IGM Financial vs. Power |
| Microsoft Corp vs. Titanium Transportation Group | Microsoft Corp vs. Mako Mining Corp | Microsoft Corp vs. XXIX Metal Corp | Microsoft Corp vs. Blackrock Silver Corp |
Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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