Correlation Between Microsoft and AltaGas

Can any of the company-specific risk be diversified away by investing in both Microsoft and AltaGas 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 AltaGas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Microsoft and AltaGas, you can compare the effects of market volatilities on Microsoft and AltaGas 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 AltaGas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and AltaGas.

Diversification Opportunities for Microsoft and AltaGas

-0.8

Correlation Coefficient

Microsoft  AltaGas

Pay attention - limited upside

The 3 months correlation between Microsoft and AltaGas is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and AltaGas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltaGas 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 AltaGas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltaGas has no effect on the direction of Microsoft i.e., Microsoft and AltaGas go up and down completely randomly.

Pair Corralation between Microsoft and AltaGas

Given the investment horizon of 90 days Microsoft is expected to under-perform the AltaGas. In addition to that, Microsoft is 1.44 times more volatile than AltaGas. It trades about -0.11 of its total potential returns per unit of risk. AltaGas is currently generating about 0.23 per unit of volatility. If you would invest  3,322  in AltaGas on December 30, 2024 and sell it today you would earn a total of  577.00  from holding AltaGas or generate 17.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Microsoft  vs.  AltaGas

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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.

AltaGas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AltaGas are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, AltaGas displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and AltaGas

The main advantage of trading using opposite Microsoft and AltaGas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, AltaGas 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 AltaGas will offset losses from the drop in AltaGas' long position.

The idea behind Microsoft and AltaGas 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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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.