Correlation Between Microsoft and Icon Long/short

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

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

Diversification Opportunities for Microsoft and Icon Long/short

0.68

Correlation Coefficient

Microsoft  Icon Long/short

Poor diversification

The 3 months correlation between Microsoft and Icon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Icon Longshort Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Long/short 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 Icon Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Long/short has no effect on the direction of Microsoft i.e., Microsoft and Icon Long/short go up and down completely randomly.

Pair Corralation between Microsoft and Icon Long/short

Given the investment horizon of 90 days Microsoft is expected to generate 0.96 times more return on investment than Icon Long/short. However, Microsoft is 1.04 times less risky than Icon Long/short. It trades about 0.26 of its potential returns per unit of risk. Icon Longshort Fund is currently generating about 0.13 per unit of risk. If you would invest  44,844  in Microsoft on May 12, 2025 and sell it today you would earn a total of  7,360  from holding Microsoft or generate 16.41% return on investment over 90 days.

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

Microsoft  vs.  Icon Longshort Fund

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft unveiled solid returns over the last few months and may actually be approaching a breakup point.

Icon Long/short

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Longshort Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Icon Long/short may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Microsoft and Icon Long/short

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

The idea behind Microsoft and Icon Longshort 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.