Correlation Between Microsoft and IShares Global

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

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

Diversification Opportunities for Microsoft and IShares Global

0.14

Correlation Coefficient

Microsoft  IShares Global

Average diversification

The 3 months correlation between Microsoft and IShares is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares Global Monthly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Monthly 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Monthly has no effect on the direction of Microsoft i.e., Microsoft and IShares Global go up and down completely randomly.

Pair Corralation between Microsoft and IShares Global

Given the investment horizon of 90 days Microsoft is expected to generate 1.23 times less return on investment than IShares Global. In addition to that, Microsoft is 1.97 times more volatile than iShares Global Monthly. It trades about 0.05 of its total potential returns per unit of risk. iShares Global Monthly is currently generating about 0.12 per unit of volatility. If you would invest  2,154  in iShares Global Monthly on September 3, 2024 and sell it today you would earn a total of  108.00  from holding iShares Global Monthly or generate 5.01% return on investment over 90 days.

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

Microsoft  vs.  iShares Global Monthly

Microsoft

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Global Monthly

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Monthly are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, IShares Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and IShares Global

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

The idea behind Microsoft and iShares Global Monthly 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.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.