Correlation Between Microsoft and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares MSCI 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 MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iShares MSCI Germany, you can compare the effects of market volatilities on Microsoft and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares MSCI.
Diversification Opportunities for Microsoft and IShares MSCI
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and IShares is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares MSCI Germany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Germany 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Germany has no effect on the direction of Microsoft i.e., Microsoft and IShares MSCI go up and down completely randomly.
Pair Corralation between Microsoft and IShares MSCI
Given the investment horizon of 90 days Microsoft is expected to generate 1.52 times more return on investment than IShares MSCI. However, Microsoft is 1.52 times more volatile than iShares MSCI Germany. It trades about -0.04 of its potential returns per unit of risk. iShares MSCI Germany is currently generating about -0.09 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (868.00) from holding Microsoft or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. iShares MSCI Germany
Performance |
| Timeline |
| Microsoft |
| iShares MSCI Germany |
Microsoft and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IShares MSCI
The main advantage of trading using opposite Microsoft and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| IShares MSCI vs. iShares MSCI United | IShares MSCI vs. iShares MSCI France | IShares MSCI vs. iShares MSCI Spain | IShares MSCI vs. iShares MSCI Italy |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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