Correlation Between ATT and WisdomTree MidCap

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

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

Diversification Opportunities for ATT and WisdomTree MidCap

0.73

Correlation Coefficient

ATT  WisdomTree MidCap

Poor diversification

The 3 months correlation between ATT and WisdomTree is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and WisdomTree MidCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree MidCap 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 WisdomTree MidCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree MidCap has no effect on the direction of ATT i.e., ATT and WisdomTree MidCap go up and down completely randomly.

Pair Corralation between ATT and WisdomTree MidCap

Taking into account the 90-day investment horizon ATT Inc is expected to generate 1.09 times more return on investment than WisdomTree MidCap. However, ATT is 1.09 times more volatile than WisdomTree MidCap Earnings. It trades about 0.18 of its potential returns per unit of risk. WisdomTree MidCap Earnings is currently generating about 0.18 per unit of risk. If you would invest  2,017  in ATT Inc on September 2, 2024 and sell it today you would earn a total of  299.00  from holding ATT Inc or generate 14.82% return on investment over 90 days.

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

ATT Inc  vs.  WisdomTree MidCap Earnings

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 uncertain basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree MidCap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree MidCap Earnings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, WisdomTree MidCap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ATT and WisdomTree MidCap

The main advantage of trading using opposite ATT and WisdomTree MidCap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, WisdomTree MidCap 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 WisdomTree MidCap will offset losses from the drop in WisdomTree MidCap's long position.

The idea behind ATT Inc and WisdomTree MidCap Earnings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.