Correlation Between Microsoft and IShares V
Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares V 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 V into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iShares V PLC, you can compare the effects of market volatilities on Microsoft and IShares V 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 V. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares V.
Diversification Opportunities for Microsoft and IShares V
Very weak diversification
The 3 months correlation between Microsoft and IShares is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares V PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares V PLC 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 V. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares V PLC has no effect on the direction of Microsoft i.e., Microsoft and IShares V go up and down completely randomly.
Pair Corralation between Microsoft and IShares V
Given the investment horizon of 90 days Microsoft is expected to generate 8.79 times more return on investment than IShares V. However, Microsoft is 8.79 times more volatile than iShares V PLC. It trades about 0.09 of its potential returns per unit of risk. iShares V PLC is currently generating about 0.16 per unit of risk. If you would invest 23,712 in Microsoft on September 19, 2024 and sell it today you would earn a total of 20,027 from holding Microsoft or generate 84.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 55.65% |
| Values | Daily Returns |
Microsoft vs. iShares V PLC
Performance |
| Timeline |
| Microsoft |
| iShares V PLC |
Microsoft and IShares V Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IShares V
The main advantage of trading using opposite Microsoft and IShares V positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares V 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 V will offset losses from the drop in IShares V's long position.| Microsoft vs. Global Blue Group | Microsoft vs. Aurora Mobile | Microsoft vs. Marqeta | Microsoft vs. Nextnav Acquisition Corp |
| IShares V vs. Lyxor UCITS Japan | IShares V vs. Lyxor UCITS Japan | IShares V vs. Lyxor UCITS Stoxx | IShares V vs. Amundi CAC 40 |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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