Correlation Between Associated British and ATT

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

By analyzing existing cross correlation between Associated British Foods and ATT Inc, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and ATT.

Diversification Opportunities for Associated British and ATT

-0.27

Correlation Coefficient

Associated British  ATT

Very good diversification

The 3 months correlation between Associated and ATT is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and ATT go up and down completely randomly.

Pair Corralation between Associated British and ATT

Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the ATT. In addition to that, Associated British is 1.32 times more volatile than ATT Inc. It trades about 0.0 of its total potential returns per unit of risk. ATT Inc is currently generating about 0.2 per unit of volatility. If you would invest  1,942  in ATT Inc on September 17, 2024 and sell it today you would earn a total of  299.00  from holding ATT Inc or generate 15.4% return on investment over 90 days.

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

Associated British Foods  vs.  ATT Inc

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Associated British is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ATT Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, ATT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Associated British and ATT

The main advantage of trading using opposite Associated British and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.

The idea behind Associated British Foods 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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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.