Correlation Between Microsoft and ISh IBds

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

By analyzing existing cross correlation between Microsoft and iSh iBds Dec29, you can compare the effects of market volatilities on Microsoft and ISh IBds 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 ISh IBds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ISh IBds.

Diversification Opportunities for Microsoft and ISh IBds

0.86

Correlation Coefficient

Microsoft  ISh IBds

Very poor diversification

The 3 months correlation between Microsoft and ISh is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and iSh iBds Dec29 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iSh iBds Dec29 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 ISh IBds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iSh iBds Dec29 has no effect on the direction of Microsoft i.e., Microsoft and ISh IBds go up and down completely randomly.

Pair Corralation between Microsoft and ISh IBds

Given the investment horizon of 90 days Microsoft is expected to generate 4.91 times more return on investment than ISh IBds. However, Microsoft is 4.91 times more volatile than iSh iBds Dec29. It trades about 0.17 of its potential returns per unit of risk. iSh iBds Dec29 is currently generating about 0.16 per unit of risk. If you would invest  45,661  in Microsoft on May 28, 2025 and sell it today you would earn a total of  4,765  from holding Microsoft or generate 10.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Microsoft  vs.  iSh iBds Dec29

Microsoft

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in September 2025.

iSh iBds Dec29

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iSh iBds Dec29 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ISh IBds is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Microsoft and ISh IBds

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

The idea behind Microsoft and iSh iBds Dec29 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.