Correlation Between Microsoft and Ideanomics
Can any of the company-specific risk be diversified away by investing in both Microsoft and Ideanomics 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 Ideanomics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Ideanomics, you can compare the effects of market volatilities on Microsoft and Ideanomics 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 Ideanomics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Ideanomics.
Diversification Opportunities for Microsoft and Ideanomics
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Ideanomics is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Ideanomics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideanomics 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 Ideanomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideanomics has no effect on the direction of Microsoft i.e., Microsoft and Ideanomics go up and down completely randomly.
Pair Corralation between Microsoft and Ideanomics
Given the investment horizon of 90 days Microsoft is expected to generate 0.15 times more return on investment than Ideanomics. However, Microsoft is 6.63 times less risky than Ideanomics. It trades about 0.1 of its potential returns per unit of risk. Ideanomics is currently generating about -0.05 per unit of risk. If you would invest 22,345 in Microsoft on August 31, 2024 and sell it today you would earn a total of 20,001 from holding Microsoft or generate 89.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 79.92% |
| Values | Daily Returns |
Microsoft vs. Ideanomics
Performance |
| Timeline |
| Microsoft |
| Ideanomics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Microsoft and Ideanomics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Ideanomics
The main advantage of trading using opposite Microsoft and Ideanomics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Ideanomics 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 Ideanomics will offset losses from the drop in Ideanomics' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Ideanomics vs. Deere Company | Ideanomics vs. Caterpillar | Ideanomics vs. Lion Electric Corp | Ideanomics vs. Xos Inc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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