Correlation Between Microsoft and Atmos Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft and Atmos Energy 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 Energy 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, you can compare the effects of market volatilities on Microsoft and Atmos Energy 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 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Atmos Energy.
Diversification Opportunities for Microsoft and Atmos Energy
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and Atmos is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy 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 Energy. 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 has no effect on the direction of Microsoft i.e., Microsoft and Atmos Energy go up and down completely randomly.
Pair Corralation between Microsoft and Atmos Energy
Assuming the 90 days trading horizon Microsoft is expected to generate 1.28 times more return on investment than Atmos Energy. However, Microsoft is 1.28 times more volatile than Atmos Energy. It trades about 0.08 of its potential returns per unit of risk. Atmos Energy is currently generating about 0.06 per unit of risk. If you would invest 23,582 in Microsoft on September 3, 2024 and sell it today you would earn a total of 16,408 from holding Microsoft or generate 69.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Atmos Energy
Performance |
| Timeline |
| Microsoft |
| Atmos Energy |
Microsoft and Atmos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Atmos Energy
The main advantage of trading using opposite Microsoft and Atmos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Atmos Energy 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 Energy will offset losses from the drop in Atmos Energy's long position.| Microsoft vs. ATRYS HEALTH SA | Microsoft vs. CHINA TONTINE WINES | Microsoft vs. Cardinal Health | Microsoft vs. National Health Investors |
| Atmos Energy vs. Warner Music Group | Atmos Energy vs. CNVISION MEDIA | Atmos Energy vs. Beijing Media | Atmos Energy vs. Tencent Music Entertainment |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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