Correlation Between Microsoft and Atea ASA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Atea ASA 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 Atea ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Atea ASA, you can compare the effects of market volatilities on Microsoft and Atea ASA 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 Atea ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Atea ASA.
Diversification Opportunities for Microsoft and Atea ASA
Poor diversification
The 3 months correlation between Microsoft and Atea is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Atea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea ASA 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 Atea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea ASA has no effect on the direction of Microsoft i.e., Microsoft and Atea ASA go up and down completely randomly.
Pair Corralation between Microsoft and Atea ASA
Assuming the 90 days trading horizon Microsoft is expected to generate 5.53 times less return on investment than Atea ASA. But when comparing it to its historical volatility, Microsoft is 7.31 times less risky than Atea ASA. It trades about 0.32 of its potential returns per unit of risk. Atea ASA is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 806.00 in Atea ASA on September 12, 2024 and sell it today you would earn a total of 396.00 from holding Atea ASA or generate 49.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Atea ASA
Performance |
| Timeline |
| Microsoft |
| Atea ASA |
Microsoft and Atea ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Atea ASA
The main advantage of trading using opposite Microsoft and Atea ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Atea ASA 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 Atea ASA will offset losses from the drop in Atea ASA's long position.| Microsoft vs. Consolidated Communications Holdings | Microsoft vs. MAROC TELECOM | Microsoft vs. EAT WELL INVESTMENT | Microsoft vs. MGIC INVESTMENT |
| Atea ASA vs. MARKET VECTR RETAIL | Atea ASA vs. National Retail Properties | Atea ASA vs. Carsales | Atea ASA vs. Fast Retailing Co |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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