Correlation Between Microsoft Corp and ATT

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

Diversification Opportunities for Microsoft Corp and ATT

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Microsoft and ATT is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Microsoft Corp 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 Corp 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 Corp i.e., Microsoft Corp and ATT go up and down completely randomly.

Pair Corralation between Microsoft Corp and ATT

Given the investment horizon of 90 days Microsoft Corp is expected to generate 1.42 times more return on investment than ATT. However, Microsoft Corp is 1.42 times more volatile than ATT Inc. It trades about -0.22 of its potential returns per unit of risk. ATT Inc is currently generating about -0.38 per unit of risk. If you would invest  27,801  in Microsoft Corp on July 2, 2022 and sell it today you would lose (4,051)  from holding Microsoft Corp or give up 14.57% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  ATT Inc

 Performance (%) 
       Timeline  
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 unsteady 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 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 October 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ATT Price Channel

Microsoft Corp and ATT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft Corp and ATT

The main advantage of trading using opposite Microsoft Corp and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp 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.
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The idea behind Microsoft Corp and ATT Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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