Correlation Between Microsoft and Ivy Value

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

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

Diversification Opportunities for Microsoft and Ivy Value

0.52

Correlation Coefficient

Microsoft  Ivy Value

Very weak diversification

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

Pair Corralation between Microsoft and Ivy Value

Given the investment horizon of 90 days Microsoft is expected to generate 1.92 times more return on investment than Ivy Value. However, Microsoft is 1.92 times more volatile than Ivy Value Fund. It trades about 0.07 of its potential returns per unit of risk. Ivy Value Fund is currently generating about 0.05 per unit of risk. If you would invest  33,246  in Microsoft on September 24, 2024 and sell it today you would earn a total of  10,414  from holding Microsoft or generate 31.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.1%
Values	Daily Returns

Microsoft  vs.  Ivy Value Fund

Microsoft

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 2 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Ivy Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivy Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Ivy Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Ivy Value

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

The idea behind Microsoft and Ivy Value Fund 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.