Correlation Between Microsoft and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares Canadian 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 Canadian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iShares Canadian Universe, you can compare the effects of market volatilities on Microsoft and IShares Canadian 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 Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares Canadian.
Diversification Opportunities for Microsoft and IShares Canadian
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares Canadian Universe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Universe 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 Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Universe has no effect on the direction of Microsoft i.e., Microsoft and IShares Canadian go up and down completely randomly.
Pair Corralation between Microsoft and IShares Canadian
Given the investment horizon of 90 days Microsoft is expected to generate 2.31 times less return on investment than IShares Canadian. In addition to that, Microsoft is 3.77 times more volatile than iShares Canadian Universe. It trades about 0.01 of its total potential returns per unit of risk. iShares Canadian Universe is currently generating about 0.08 per unit of volatility. If you would invest 2,663 in iShares Canadian Universe on November 3, 2024 and sell it today you would earn a total of 201.00 from holding iShares Canadian Universe or generate 7.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. iShares Canadian Universe
Performance |
| Timeline |
| Microsoft |
| iShares Canadian Universe |
Microsoft and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IShares Canadian
The main advantage of trading using opposite Microsoft and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares Canadian 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 Canadian will offset losses from the drop in IShares Canadian's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares MSCI EAFE | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Canadian Real |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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