Correlation Between Microsoft and IShares II
Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares II 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 II into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iShares II Public, you can compare the effects of market volatilities on Microsoft and IShares II 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 II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares II.
Diversification Opportunities for Microsoft and IShares II
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and IShares is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares II Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares II 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 II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares II Public has no effect on the direction of Microsoft i.e., Microsoft and IShares II go up and down completely randomly.
Pair Corralation between Microsoft and IShares II
Given the investment horizon of 90 days Microsoft is expected to generate 1.72 times more return on investment than IShares II. However, Microsoft is 1.72 times more volatile than iShares II Public. It trades about -0.04 of its potential returns per unit of risk. iShares II Public is currently generating about -0.13 per unit of risk. If you would invest 42,388 in Microsoft on August 25, 2024 and sell it today you would lose (688.00) from holding Microsoft or give up 1.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. iShares II Public
Performance |
| Timeline |
| Microsoft |
| iShares II Public |
Microsoft and IShares II Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IShares II
The main advantage of trading using opposite Microsoft and IShares II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares II 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 II will offset losses from the drop in IShares II's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| IShares II vs. Vanguard SP 500 | IShares II vs. SPDR Dow Jones | IShares II vs. iShares Core MSCI | IShares II vs. iShares SP 500 |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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