Correlation Between Microsoft and IShares Focused
Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares Focused 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 Focused into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iShares Focused Value, you can compare the effects of market volatilities on Microsoft and IShares Focused 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 Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares Focused.
Diversification Opportunities for Microsoft and IShares Focused
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and IShares is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares Focused Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Focused Value 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 Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Focused Value has no effect on the direction of Microsoft i.e., Microsoft and IShares Focused go up and down completely randomly.
Pair Corralation between Microsoft and IShares Focused
Given the investment horizon of 90 days Microsoft is expected to generate 2.02 times less return on investment than IShares Focused. But when comparing it to its historical volatility, Microsoft is 1.29 times less risky than IShares Focused. It trades about 0.19 of its potential returns per unit of risk. iShares Focused Value is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 6,939 in iShares Focused Value on September 1, 2024 and sell it today you would earn a total of 667.00 from holding iShares Focused Value or generate 9.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Microsoft vs. iShares Focused Value
Performance |
| Timeline |
| Microsoft |
| iShares Focused Value |
Microsoft and IShares Focused Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IShares Focused
The main advantage of trading using opposite Microsoft and IShares Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares Focused 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 Focused will offset losses from the drop in IShares Focused's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| IShares Focused vs. Vanguard Mid Cap Value | IShares Focused vs. SPDR SP Dividend | IShares Focused vs. Pacer Cash Cows | IShares Focused vs. iShares SP Mid Cap |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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