Correlation Between Microsoft and IGO
Can any of the company-specific risk be diversified away by investing in both Microsoft and IGO 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 IGO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and IGO Limited, you can compare the effects of market volatilities on Microsoft and IGO 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 IGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IGO.
Diversification Opportunities for Microsoft and IGO
Very good diversification
The 3 months correlation between Microsoft and IGO is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited 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 IGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGO Limited has no effect on the direction of Microsoft i.e., Microsoft and IGO go up and down completely randomly.
Pair Corralation between Microsoft and IGO
Given the investment horizon of 90 days Microsoft is expected to generate 2.97 times less return on investment than IGO. But when comparing it to its historical volatility, Microsoft is 4.95 times less risky than IGO. It trades about 0.03 of its potential returns per unit of risk. IGO Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 417.00 in IGO Limited on August 29, 2024 and sell it today you would lose (77.00) from holding IGO Limited or give up 18.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.09% |
| Values | Daily Returns |
Microsoft vs. IGO Limited
Performance |
| Timeline |
| Microsoft |
| IGO Limited |
Microsoft and IGO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IGO
The main advantage of trading using opposite Microsoft and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IGO 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 IGO will offset losses from the drop in IGO's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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