Correlation Between Entergy Arkansas and ATT

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

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

Diversification Opportunities for Entergy Arkansas and ATT

0.78

Correlation Coefficient

Entergy Arkansas  ATT

Poor diversification

The 3 months correlation between Entergy and ATT is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Entergy Arkansas LLC and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Entergy Arkansas 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 Entergy Arkansas LLC 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 Entergy Arkansas i.e., Entergy Arkansas and ATT go up and down completely randomly.

Pair Corralation between Entergy Arkansas and ATT

Considering the 90-day investment horizon Entergy Arkansas LLC is expected to under-perform the ATT. In addition to that, Entergy Arkansas is 1.24 times more volatile than ATT Inc. It trades about -0.18 of its total potential returns per unit of risk. ATT Inc is currently generating about -0.03 per unit of volatility. If you would invest  2,427  in ATT Inc on September 21, 2024 and sell it today you would lose (27.00) from holding ATT Inc or give up 1.11% of portfolio value over 90 days.

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

Entergy Arkansas LLC  vs.  ATT Inc

Entergy Arkansas LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy Arkansas LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm 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. Despite somewhat strong fundamental drivers, ATT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Entergy Arkansas and ATT

The main advantage of trading using opposite Entergy Arkansas and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy Arkansas 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 Entergy Arkansas LLC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.