Correlation Between Dow Jones and ATT
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and ATT Inc, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ATT.
Diversification Opportunities for Dow Jones and ATT
Poor diversification
The 3 months correlation between Dow and ATT is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and ATT go up and down completely randomly.
Pair Corralation between Dow Jones and ATT
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.19 times less return on investment than ATT. But when comparing it to its historical volatility, Dow Jones Industrial is 1.13 times less risky than ATT. It trades about 0.24 of its potential returns per unit of risk. ATT Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,183 in ATT Inc on August 26, 2024 and sell it today you would earn a total of 135.00 from holding ATT Inc or generate 6.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. ATT Inc
Performance |
| Timeline |
Dow Jones and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ATT Inc
Pair trading matchups for ATT
Pair Trading with Dow Jones and ATT
The main advantage of trading using opposite Dow Jones and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
| ATT vs. Liberty Broadband Srs | ATT vs. Ribbon Communications | ATT vs. Liberty Broadband Srs | ATT vs. Shenandoah Telecommunications Co |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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