Correlation Between IncomeShares SP500 and IncomeShares Microsoft

Can any of the company-specific risk be diversified away by investing in both IncomeShares SP500 and IncomeShares Microsoft 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 IncomeShares SP500 and IncomeShares Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IncomeShares SP500 Options and IncomeShares Microsoft Options, you can compare the effects of market volatilities on IncomeShares SP500 and IncomeShares Microsoft 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 IncomeShares SP500 with a short position of IncomeShares Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of IncomeShares SP500 and IncomeShares Microsoft.

Diversification Opportunities for IncomeShares SP500 and IncomeShares Microsoft

-0.03

Correlation Coefficient

IncomeShares SP500  IncomeShares Microsoft

Good diversification

The 3 months correlation between IncomeShares and IncomeShares is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding IncomeShares SP500 Options and IncomeShares Microsoft Options in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares Microsoft and IncomeShares SP500 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 IncomeShares SP500 Options are associated (or correlated) with IncomeShares Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares Microsoft has no effect on the direction of IncomeShares SP500 i.e., IncomeShares SP500 and IncomeShares Microsoft go up and down completely randomly.

Pair Corralation between IncomeShares SP500 and IncomeShares Microsoft

Assuming the 90 days trading horizon IncomeShares SP500 Options is expected to under-perform the IncomeShares Microsoft. But the etf apears to be less risky and, when comparing its historical volatility, IncomeShares SP500 Options is 1.16 times less risky than IncomeShares Microsoft. The etf trades about -0.08 of its potential returns per unit of risk. The IncomeShares Microsoft Options is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  918.00  in IncomeShares Microsoft Options on October 5, 2024 and sell it today you would earn a total of  20.00  from holding IncomeShares Microsoft Options or generate 2.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

IncomeShares SP500 Options  vs.  IncomeShares Microsoft Options

IncomeShares SP500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IncomeShares SP500 Options has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IncomeShares SP500 is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

IncomeShares Microsoft

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IncomeShares Microsoft Options are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, IncomeShares Microsoft is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IncomeShares SP500 and IncomeShares Microsoft

The main advantage of trading using opposite IncomeShares SP500 and IncomeShares Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IncomeShares SP500 position performs unexpectedly, IncomeShares Microsoft 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 IncomeShares Microsoft will offset losses from the drop in IncomeShares Microsoft's long position.

The idea behind IncomeShares SP500 Options and IncomeShares Microsoft Options pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.