Correlation Between Microsoft and IShares VII

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

By analyzing existing cross correlation between Microsoft and iShares VII Public, you can compare the effects of market volatilities on Microsoft and IShares VII 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 VII. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and IShares VII.

Diversification Opportunities for Microsoft and IShares VII

-0.52

Correlation Coefficient

Microsoft  IShares VII

Excellent diversification

The 3 months correlation between Microsoft and IShares is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares VII Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares VII Public 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 VII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares VII Public has no effect on the direction of Microsoft i.e., Microsoft and IShares VII go up and down completely randomly.

Pair Corralation between Microsoft and IShares VII

Given the investment horizon of 90 days Microsoft is expected to under-perform the IShares VII. In addition to that, Microsoft is 1.1 times more volatile than iShares VII Public. It trades about -0.06 of its total potential returns per unit of risk. iShares VII Public is currently generating about 0.08 per unit of volatility. If you would invest  12,559  in iShares VII Public on November 29, 2024 and sell it today you would earn a total of  776.00  from holding iShares VII Public or generate 6.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Microsoft  vs.  iShares VII Public

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares VII Public

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII Public are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares VII may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Microsoft and IShares VII

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

The idea behind Microsoft and iShares VII Public 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.