Correlation Between ATT and American CuMo
Can any of the company-specific risk be diversified away by investing in both ATT and American CuMo 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 American CuMo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and American CuMo Mining, you can compare the effects of market volatilities on ATT and American CuMo 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 American CuMo. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and American CuMo.
Diversification Opportunities for ATT and American CuMo
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ATT and American is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and American CuMo Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American CuMo Mining 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 American CuMo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American CuMo Mining has no effect on the direction of ATT i.e., ATT and American CuMo go up and down completely randomly.
Pair Corralation between ATT and American CuMo
Taking into account the 90-day investment horizon ATT is expected to generate 4.38 times less return on investment than American CuMo. But when comparing it to its historical volatility, ATT Inc is 13.56 times less risky than American CuMo. It trades about 0.09 of its potential returns per unit of risk. American CuMo Mining is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2.00 in American CuMo Mining on September 15, 2024 and sell it today you would lose (1.00) from holding American CuMo Mining or give up 50.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 98.44% |
Values | Daily Returns |
ATT Inc vs. American CuMo Mining
Performance |
Timeline |
ATT Inc |
American CuMo Mining |
ATT and American CuMo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ATT and American CuMo
The main advantage of trading using opposite ATT and American CuMo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, American CuMo 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 American CuMo will offset losses from the drop in American CuMo's long position.The idea behind ATT Inc and American CuMo Mining 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.American CuMo vs. Pasinex Resources Limited | American CuMo vs. Themac Resources Group | American CuMo vs. East Africa Metals | American CuMo vs. Forsys Metals Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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