Correlation Between ATT and Liontown Resources

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

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

Diversification Opportunities for ATT and Liontown Resources

0.31

Correlation Coefficient

ATT  Liontown Resources

Weak diversification

The 3 months correlation between ATT and Liontown is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Liontown Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown Resources 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 Liontown Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liontown Resources has no effect on the direction of ATT i.e., ATT and Liontown Resources go up and down completely randomly.

Pair Corralation between ATT and Liontown Resources

Taking into account the 90-day investment horizon ATT is expected to generate 1.38 times less return on investment than Liontown Resources. But when comparing it to its historical volatility, ATT Inc is 4.13 times less risky than Liontown Resources. It trades about 0.19 of its potential returns per unit of risk. Liontown Resources Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Liontown Resources Limited on August 31, 2024 and sell it today you would earn a total of  6.00  from holding Liontown Resources Limited or generate 13.64% return on investment over 90 days.

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

ATT Inc  vs.  Liontown Resources Limited

ATT Inc

Risk-Adjusted Performance

15 of 100

Solid

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

Liontown Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liontown Resources Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Liontown Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATT and Liontown Resources

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

The idea behind ATT Inc and Liontown Resources Limited 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.