Correlation Between ATT and Microsoft Corp

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Can any of the company-specific risk be diversified away by investing in both ATT and Microsoft Corp 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 ATT and Microsoft Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Microsoft Corp, you can compare the effects of market volatilities on ATT and Microsoft Corp 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 ATT with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Microsoft Corp.

Diversification Opportunities for ATT and Microsoft Corp

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ATT and Microsoft is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp and ATT 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 ATT Inc are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of ATT i.e., ATT and Microsoft Corp go up and down completely randomly.

Pair Corralation between ATT and Microsoft Corp

Taking into account the 90-day investment horizon ATT Inc is expected to under-perform the Microsoft Corp. But the stock apears to be less risky and, when comparing its historical volatility, ATT Inc is 1.16 times less risky than Microsoft Corp. The stock trades about -0.24 of its potential returns per unit of risk. The Microsoft Corp is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  25,809  in Microsoft Corp on July 9, 2022 and sell it today you would lose (1,130)  from holding Microsoft Corp or give up 4.38% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  Microsoft Corp

 Performance (%) 
       Timeline  
ATT Inc 
ATT Performance
0 of 100
Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in November 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ATT Price Channel

Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Microsoft Price Channel

ATT and Microsoft Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and Microsoft Corp

The main advantage of trading using opposite ATT and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Microsoft Corp 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.
ATT vs. Amazon Inc
The idea behind ATT Inc and Microsoft Corp 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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