Correlation Between Microsoft and IShares Ibovespa
Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares Ibovespa 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 Ibovespa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iShares Ibovespa Index, you can compare the effects of market volatilities on Microsoft and IShares Ibovespa 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 Ibovespa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares Ibovespa.
Diversification Opportunities for Microsoft and IShares Ibovespa
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and IShares is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares Ibovespa Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Ibovespa Index 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 Ibovespa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Ibovespa Index has no effect on the direction of Microsoft i.e., Microsoft and IShares Ibovespa go up and down completely randomly.
Pair Corralation between Microsoft and IShares Ibovespa
Given the investment horizon of 90 days Microsoft is expected to generate 1.49 times more return on investment than IShares Ibovespa. However, Microsoft is 1.49 times more volatile than iShares Ibovespa Index. It trades about 0.07 of its potential returns per unit of risk. iShares Ibovespa Index is currently generating about 0.05 per unit of risk. If you would invest 30,280 in Microsoft on August 31, 2024 and sell it today you would earn a total of 12,019 from holding Microsoft or generate 39.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.49% |
| Values | Daily Returns |
Microsoft vs. iShares Ibovespa Index
Performance |
| Timeline |
| Microsoft |
| iShares Ibovespa Index |
Microsoft and IShares Ibovespa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IShares Ibovespa
The main advantage of trading using opposite Microsoft and IShares Ibovespa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares Ibovespa 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 Ibovespa will offset losses from the drop in IShares Ibovespa's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| IShares Ibovespa vs. iShares BMFBovespa Small | IShares Ibovespa vs. iShares Trust | IShares Ibovespa vs. iShares Trust | IShares Ibovespa vs. iShares Trust |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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