Correlation Between Microsoft and ATMOS

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

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

Diversification Opportunities for Microsoft and ATMOS

-0.34

Correlation Coefficient

Microsoft  ATMOS

Very good diversification

The 3 months correlation between Microsoft and ATMOS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ATMOS ENERGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATMOS ENERGY P 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 ATMOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATMOS ENERGY P has no effect on the direction of Microsoft i.e., Microsoft and ATMOS go up and down completely randomly.

Pair Corralation between Microsoft and ATMOS

Given the investment horizon of 90 days Microsoft is expected to generate 1.14 times more return on investment than ATMOS. However, Microsoft is 1.14 times more volatile than ATMOS ENERGY P. It trades about 0.01 of its potential returns per unit of risk. ATMOS ENERGY P is currently generating about -0.24 per unit of risk. If you would invest  43,781  in Microsoft on September 19, 2024 and sell it today you would lose (42.00) from holding Microsoft or give up 0.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.19%
Values	Daily Returns

Microsoft  vs.  ATMOS ENERGY P

Microsoft

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

ATMOS ENERGY P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATMOS ENERGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for ATMOS ENERGY P investors.

Pair Trading with Microsoft and ATMOS

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

The idea behind Microsoft and ATMOS ENERGY P 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.