Correlation Between Lumen Technologies and ATT

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

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

Diversification Opportunities for Lumen Technologies and ATT

0.67

Correlation Coefficient

Lumen Technologies  ATT

Poor diversification

The 3 months correlation between Lumen and ATT is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Lumen Technologies 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 Lumen Technologies 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 Lumen Technologies i.e., Lumen Technologies and ATT go up and down completely randomly.

Pair Corralation between Lumen Technologies and ATT

Given the investment horizon of 90 days Lumen Technologies is expected to generate 4.09 times more return on investment than ATT. However, Lumen Technologies is 4.09 times more volatile than ATT Inc. It trades about 0.16 of its potential returns per unit of risk. ATT Inc is currently generating about 0.18 per unit of risk. If you would invest  471.00  in Lumen Technologies on September 3, 2024 and sell it today you would earn a total of  263.00  from holding Lumen Technologies or generate 55.84% return on investment over 90 days.

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

Lumen Technologies  vs.  ATT Inc

Lumen Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lumen Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Lumen Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

ATT Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumen Technologies and ATT

The main advantage of trading using opposite Lumen Technologies and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumen Technologies 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 Lumen Technologies 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.