Correlation Between Microsoft and IShares Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares Energy 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 Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iShares Energy ETF, you can compare the effects of market volatilities on Microsoft and IShares Energy 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 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares Energy.
Diversification Opportunities for Microsoft and IShares Energy
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and IShares is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares Energy ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Energy ETF 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Energy ETF has no effect on the direction of Microsoft i.e., Microsoft and IShares Energy go up and down completely randomly.
Pair Corralation between Microsoft and IShares Energy
Given the investment horizon of 90 days Microsoft is expected to under-perform the IShares Energy. In addition to that, Microsoft is 1.68 times more volatile than iShares Energy ETF. It trades about -0.05 of its total potential returns per unit of risk. iShares Energy ETF is currently generating about 0.44 per unit of volatility. If you would invest 4,684 in iShares Energy ETF on August 27, 2024 and sell it today you would earn a total of 454.00 from holding iShares Energy ETF or generate 9.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. iShares Energy ETF
Performance |
| Timeline |
| Microsoft |
| iShares Energy ETF |
Microsoft and IShares Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IShares Energy
The main advantage of trading using opposite Microsoft and IShares Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares Energy 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 Energy will offset losses from the drop in IShares Energy's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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