Correlation Between Auto Trader and Microsoft Corp

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

Diversification Opportunities for Auto Trader and Microsoft Corp

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between ATDRY and Microsoft is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp and Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and Microsoft Corp go up and down completely randomly.

Pair Corralation between Auto Trader and Microsoft Corp

If you would invest  20,234  in Microsoft Corp on June 28, 2022 and sell it today you would earn a total of  3,558  from holding Microsoft Corp or generate 17.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Auto Trader Group  vs.  Microsoft Corp

 Performance (%) 
       Timeline  
Auto Trader Group 
ATDRY Performance
0 of 100
Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Auto Trader is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
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 comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

Auto Trader and Microsoft Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Auto Trader and Microsoft Corp

The main advantage of trading using opposite Auto Trader and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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.
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The idea behind Auto Trader Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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