Correlation Between Capital One and ATT

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

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

Diversification Opportunities for Capital One and ATT

0.8

Correlation Coefficient

Capital One  ATT

Very poor diversification

The 3 months correlation between Capital and ATT is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Capital One 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 Capital One Financial 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 Capital One i.e., Capital One and ATT go up and down completely randomly.

Pair Corralation between Capital One and ATT

Assuming the 90 days trading horizon Capital One is expected to generate 1.08 times less return on investment than ATT. In addition to that, Capital One is 1.02 times more volatile than ATT Inc. It trades about 0.04 of its total potential returns per unit of risk. ATT Inc is currently generating about 0.04 per unit of volatility. If you would invest  1,637  in ATT Inc on September 5, 2024 and sell it today you would earn a total of  382.00  from holding ATT Inc or generate 23.34% return on investment over 90 days.

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

Capital One Financial  vs.  ATT Inc

Capital One Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Capital One is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

ATT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ATT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capital One and ATT

The main advantage of trading using opposite Capital One and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One 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 Capital One Financial 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.