Correlation Between ATT and ATT

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

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

Diversification Opportunities for ATT and ATT

1.0

Correlation Coefficient

ATT  ATT

No risk reduction

The 3 months correlation between ATT and ATT is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and ATT 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 ATT Inc 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 ATT i.e., ATT and ATT go up and down completely randomly.

Pair Corralation between ATT and ATT

Assuming the 90 days trading horizon ATT Inc is expected to under-perform the ATT. But the stock apears to be less risky and, when comparing its historical volatility, ATT Inc is 1.44 times less risky than ATT. The stock trades about -0.13 of its potential returns per unit of risk. The ATT Inc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,202  in ATT Inc on September 23, 2024 and sell it today you would lose (24.00) from holding ATT Inc or give up 1.09% of portfolio value over 90 days.

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

ATT Inc  vs.  ATT Inc

ATT Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 15 (%) 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.

ATT Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, ATT reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATT and ATT

The main advantage of trading using opposite ATT and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.