Correlation Between Microsoft and IShares Short
Can any of the company-specific risk be diversified away by investing in both Microsoft and IShares Short 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 Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and iShares Short Term, you can compare the effects of market volatilities on Microsoft and IShares Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares Short.
Diversification Opportunities for Microsoft and IShares Short
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and IShares is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Short Term 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Short Term has no effect on the direction of Microsoft i.e., Microsoft and IShares Short go up and down completely randomly.
Pair Corralation between Microsoft and IShares Short
Given the investment horizon of 90 days Microsoft is expected to under-perform the IShares Short. In addition to that, Microsoft is 7.56 times more volatile than iShares Short Term. It trades about -0.04 of its total potential returns per unit of risk. iShares Short Term is currently generating about 0.21 per unit of volatility. If you would invest 1,700 in iShares Short Term on August 30, 2024 and sell it today you would earn a total of 18.00 from holding iShares Short Term or generate 1.06% 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 Short Term
Performance |
| Timeline |
| Microsoft |
| iShares Short Term |
Microsoft and IShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and IShares Short
The main advantage of trading using opposite Microsoft and IShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, IShares Short 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 Short will offset losses from the drop in IShares Short's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| IShares Short vs. iShares Conservative Short | IShares Short vs. iShares Conservative Strategic | IShares Short vs. iShares Floating Rate | IShares Short vs. iShares High Quality |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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