Correlation Between Telephone and ATT

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

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

Diversification Opportunities for Telephone and ATT

0.64

Correlation Coefficient

Telephone  ATT

Poor diversification

The 3 months correlation between Telephone and ATT is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Telephone and Data and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Telephone 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 Telephone and Data are associated (or correlated) with ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Telephone i.e., Telephone and ATT go up and down completely randomly.

Pair Corralation between Telephone and ATT

Assuming the 90 days trading horizon Telephone and Data is expected to under-perform the ATT. In addition to that, Telephone is 1.04 times more volatile than ATT Inc. It trades about -0.44 of its total potential returns per unit of risk. ATT Inc is currently generating about -0.18 per unit of volatility. If you would invest  2,189  in ATT Inc on September 12, 2024 and sell it today you would lose (54.00) from holding ATT Inc or give up 2.47% of portfolio value over 90 days.

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

Telephone and Data  vs.  ATT Inc

Telephone and Data

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telephone and Data has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Telephone is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ATT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ATT is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Telephone and ATT

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

The idea behind Telephone and Data and ATT Inc 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.