Correlation Between Microsoft and IQ 50
Can any of the company-specific risk be diversified away by investing in both Microsoft and IQ 50 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 IQ 50 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and IQ 50 Percent, you can compare the effects of market volatilities on Microsoft and IQ 50 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 IQ 50. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IQ 50.
Diversification Opportunities for Microsoft and IQ 50
Average diversification
The 3 months correlation between Microsoft and HFXI is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and IQ 50 Percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ 50 Percent 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 IQ 50. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ 50 Percent has no effect on the direction of Microsoft i.e., Microsoft and IQ 50 go up and down completely randomly.
Pair Corralation between Microsoft and IQ 50
Given the investment horizon of 90 days Microsoft is expected to generate 1.95 times more return on investment than IQ 50. However, Microsoft is 1.95 times more volatile than IQ 50 Percent. It trades about 0.08 of its potential returns per unit of risk. IQ 50 Percent is currently generating about 0.07 per unit of risk. If you would invest 25,277 in Microsoft on September 3, 2024 and sell it today you would earn a total of 17,821 from holding Microsoft or generate 70.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. IQ 50 Percent
Performance |
| Timeline |
| Microsoft |
| IQ 50 Percent |
Microsoft and IQ 50 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IQ 50
The main advantage of trading using opposite Microsoft and IQ 50 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IQ 50 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 IQ 50 will offset losses from the drop in IQ 50's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| IQ 50 vs. iShares Currency Hedged | IQ 50 vs. Xtrackers MSCI All | IQ 50 vs. iShares Currency Hedged | IQ 50 vs. WisdomTree International Hedged |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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