Correlation Between Microsoft and ATP
Can any of the company-specific risk be diversified away by investing in both Microsoft and ATP 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 ATP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ATP, you can compare the effects of market volatilities on Microsoft and ATP 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 ATP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ATP.
Diversification Opportunities for Microsoft and ATP
Good diversification
The 3 months correlation between Microsoft and ATP is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ATP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATP 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 ATP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATP has no effect on the direction of Microsoft i.e., Microsoft and ATP go up and down completely randomly.
Pair Corralation between Microsoft and ATP
Given the investment horizon of 90 days Microsoft is expected to generate 31.64 times less return on investment than ATP. But when comparing it to its historical volatility, Microsoft is 44.42 times less risky than ATP. It trades about 0.09 of its potential returns per unit of risk. ATP is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.01 in ATP on August 27, 2024 and sell it today you would lose (0.01) from holding ATP or give up 69.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 56.04% |
| Values | Daily Returns |
Microsoft vs. ATP
Performance |
| Timeline |
| Microsoft |
| ATP |
Microsoft and ATP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ATP
The main advantage of trading using opposite Microsoft and ATP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ATP 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 ATP will offset losses from the drop in ATP's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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