Correlation Between Microsoft and IShares Future
Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares Future 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 Future into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iShares Future AI, you can compare the effects of market volatilities on Microsoft and IShares Future 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 Future. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares Future.
Diversification Opportunities for Microsoft and IShares Future
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and IShares is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares Future AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Future AI 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 Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Future AI has no effect on the direction of Microsoft i.e., Microsoft and IShares Future go up and down completely randomly.
Pair Corralation between Microsoft and IShares Future
Given the investment horizon of 90 days Microsoft is expected to generate 0.74 times more return on investment than IShares Future. However, Microsoft is 1.35 times less risky than IShares Future. It trades about 0.32 of its potential returns per unit of risk. iShares Future AI is currently generating about 0.14 per unit of risk. If you would invest 42,218 in Microsoft on September 13, 2024 and sell it today you would earn a total of 3,249 from holding Microsoft or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. iShares Future AI
Performance |
| Timeline |
| Microsoft |
| iShares Future AI |
Microsoft and IShares Future Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IShares Future
The main advantage of trading using opposite Microsoft and IShares Future positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares Future 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 Future will offset losses from the drop in IShares Future's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| IShares Future vs. Invesco DWA Utilities | IShares Future vs. Invesco Dynamic Large | IShares Future vs. SCOR PK | IShares Future vs. Morningstar Unconstrained Allocation |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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