Correlation Between Microsoft and IShares MSCI

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

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

Diversification Opportunities for Microsoft and IShares MSCI

-0.83

Correlation Coefficient

Microsoft  IShares MSCI

Pay attention - limited upside

The 3 months correlation between Microsoft and IShares is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iShares MSCI Finland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Finland 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Finland has no effect on the direction of Microsoft i.e., Microsoft and IShares MSCI go up and down completely randomly.

Pair Corralation between Microsoft and IShares MSCI

Given the investment horizon of 90 days Microsoft is expected to under-perform the IShares MSCI. In addition to that, Microsoft is 1.4 times more volatile than iShares MSCI Finland. It trades about -0.11 of its total potential returns per unit of risk. iShares MSCI Finland is currently generating about 0.2 per unit of volatility. If you would invest  3,250  in iShares MSCI Finland on December 30, 2024 and sell it today you would earn a total of  473.00  from holding iShares MSCI Finland or generate 14.55% return on investment over 90 days.

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

Microsoft  vs.  iShares MSCI Finland

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

iShares MSCI Finland

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Finland are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, IShares MSCI disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and IShares MSCI

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

The idea behind Microsoft and iShares MSCI Finland 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.