Correlation Between Microsoft and IShares ESG
Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares ESG 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 ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iShares ESG MSCI, you can compare the effects of market volatilities on Microsoft and IShares ESG 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 ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares ESG.
Diversification Opportunities for Microsoft and IShares ESG
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and IShares is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares ESG MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG MSCI 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG MSCI has no effect on the direction of Microsoft i.e., Microsoft and IShares ESG go up and down completely randomly.
Pair Corralation between Microsoft and IShares ESG
Given the investment horizon of 90 days Microsoft is expected to under-perform the IShares ESG. In addition to that, Microsoft is 2.55 times more volatile than iShares ESG MSCI. It trades about -0.01 of its total potential returns per unit of risk. iShares ESG MSCI is currently generating about 0.24 per unit of volatility. If you would invest 4,545 in iShares ESG MSCI on November 3, 2024 and sell it today you would earn a total of 178.00 from holding iShares ESG MSCI or generate 3.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Microsoft vs. iShares ESG MSCI
Performance |
| Timeline |
| Microsoft |
| iShares ESG MSCI |
Microsoft and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IShares ESG
The main advantage of trading using opposite Microsoft and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| IShares ESG vs. iShares ESG MSCI | IShares ESG vs. iShares ESG Advanced | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Advanced |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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