Correlation Between ATT and STORE

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

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

Diversification Opportunities for ATT and STORE

-0.67

Correlation Coefficient

ATT  STORE

Excellent diversification

The 3 months correlation between ATT and STORE is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and STORE CAP P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORE CAP P 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 STORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORE CAP P has no effect on the direction of ATT i.e., ATT and STORE go up and down completely randomly.

Pair Corralation between ATT and STORE

Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.75 times more return on investment than STORE. However, ATT Inc is 1.33 times less risky than STORE. It trades about 0.09 of its potential returns per unit of risk. STORE CAP P is currently generating about -0.14 per unit of risk. If you would invest  2,199  in ATT Inc on September 15, 2024 and sell it today you would earn a total of  164.00  from holding ATT Inc or generate 7.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	76.56%
Values	Daily Returns

ATT Inc  vs.  STORE CAP P

ATT Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

STORE CAP P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STORE CAP P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for STORE CAP P investors.

Pair Trading with ATT and STORE

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

The idea behind ATT Inc and STORE CAP P 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.