Correlation Between Microsoft and Atlassian Plc

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

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

Diversification Opportunities for Microsoft and Atlassian Plc

-0.49

Correlation Coefficient

Microsoft  Atlassian Plc

Very good diversification

The 3 months correlation between Microsoft and Atlassian is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Atlassian Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlassian Plc 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 Atlassian Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlassian Plc has no effect on the direction of Microsoft i.e., Microsoft and Atlassian Plc go up and down completely randomly.

Pair Corralation between Microsoft and Atlassian Plc

Assuming the 90 days trading horizon Microsoft is expected to generate 0.46 times more return on investment than Atlassian Plc. However, Microsoft is 2.15 times less risky than Atlassian Plc. It trades about 0.4 of its potential returns per unit of risk. Atlassian Plc is currently generating about -0.04 per unit of risk. If you would invest  8,719  in Microsoft on April 22, 2025 and sell it today you would earn a total of  3,136  from holding Microsoft or generate 35.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Microsoft  vs.  Atlassian Plc

Microsoft

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Microsoft sustained solid returns over the last few months and may actually be approaching a breakup point.

Atlassian Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atlassian Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Atlassian Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Atlassian Plc

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

The idea behind Microsoft and Atlassian Plc 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.

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 the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.