Correlation Between Microsoft and ATT
Can any of the company-specific risk be diversified away by investing in both Microsoft and ATT 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 ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and ATT Inc, you can compare the effects of market volatilities on Microsoft and ATT 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 ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and ATT.
Diversification Opportunities for Microsoft and ATT
Modest diversification
The 3 months correlation between Microsoft and ATT is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Microsoft i.e., Microsoft and ATT go up and down completely randomly.
Pair Corralation between Microsoft and ATT
Given the investment horizon of 90 days Microsoft is expected to generate 1.5 times less return on investment than ATT. In addition to that, Microsoft is 1.29 times more volatile than ATT Inc. It trades about 0.03 of its total potential returns per unit of risk. ATT Inc is currently generating about 0.06 per unit of volatility. If you would invest 1,770 in ATT Inc on August 24, 2024 and sell it today you would earn a total of 268.00 from holding ATT Inc or generate 15.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. ATT Inc
Performance |
| Timeline |
| Microsoft |
| ATT Inc |
Microsoft and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and ATT
The main advantage of trading using opposite Microsoft and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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