Correlation Between Microsoft and Atmos Energy

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

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

Diversification Opportunities for Microsoft and Atmos Energy

0.78

Correlation Coefficient

Microsoft  Atmos Energy

Poor diversification

The 3 months correlation between Microsoft and Atmos is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy 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 Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of Microsoft i.e., Microsoft and Atmos Energy go up and down completely randomly.

Pair Corralation between Microsoft and Atmos Energy

Assuming the 90 days trading horizon Microsoft is expected to generate 1.23 times less return on investment than Atmos Energy. In addition to that, Microsoft is 1.77 times more volatile than Atmos Energy. It trades about 0.08 of its total potential returns per unit of risk. Atmos Energy is currently generating about 0.18 per unit of volatility. If you would invest  38,833  in Atmos Energy on October 24, 2024 and sell it today you would earn a total of  3,755  from holding Atmos Energy or generate 9.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Microsoft  vs.  Atmos Energy

Microsoft

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Atmos Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Atmos Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Microsoft and Atmos Energy

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

The idea behind Microsoft and Atmos Energy 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.