Correlation Between ATT and Parks America

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

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

Diversification Opportunities for ATT and Parks America

0.61

Correlation Coefficient

ATT  Parks America

Poor diversification

The 3 months correlation between ATT and Parks is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Parks America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parks America 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 Parks America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parks America has no effect on the direction of ATT i.e., ATT and Parks America go up and down completely randomly.

Pair Corralation between ATT and Parks America

Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.32 times more return on investment than Parks America. However, ATT Inc is 3.15 times less risky than Parks America. It trades about 0.19 of its potential returns per unit of risk. Parks America is currently generating about 0.06 per unit of risk. If you would invest  2,031  in ATT Inc on September 4, 2024 and sell it today you would earn a total of  343.00  from holding ATT Inc or generate 16.89% 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.  Parks America

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.

Parks America

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Parks America are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Parks America sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATT and Parks America

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

The idea behind ATT Inc and Parks America 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.