Correlation Between ATT and Spacetalk
Can any of the company-specific risk be diversified away by investing in both ATT and Spacetalk 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 Spacetalk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Spacetalk, you can compare the effects of market volatilities on ATT and Spacetalk 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 Spacetalk. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Spacetalk.
Diversification Opportunities for ATT and Spacetalk
Significant diversification
The 3 months correlation between ATT and Spacetalk is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Spacetalk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spacetalk 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 Spacetalk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spacetalk has no effect on the direction of ATT i.e., ATT and Spacetalk go up and down completely randomly.
Pair Corralation between ATT and Spacetalk
Assuming the 90 days trading horizon ATT is expected to generate 17.56 times less return on investment than Spacetalk. But when comparing it to its historical volatility, ATT Inc is 30.94 times less risky than Spacetalk. It trades about 0.14 of its potential returns per unit of risk. Spacetalk is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8.00 in Spacetalk on November 1, 2024 and sell it today you would earn a total of 1.45 from holding Spacetalk or generate 18.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. Spacetalk
Performance |
| Timeline |
| ATT Inc |
| Spacetalk |
ATT and Spacetalk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Spacetalk
The main advantage of trading using opposite ATT and Spacetalk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Spacetalk 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 Spacetalk will offset losses from the drop in Spacetalk's long position.| ATT vs. GREENX METALS LTD | ATT vs. PennyMac Mortgage Investment | ATT vs. HK Electric Investments | ATT vs. PennantPark Investment |
| Spacetalk vs. T Mobile | Spacetalk vs. China Mobile Limited | Spacetalk vs. Verizon Communications | Spacetalk vs. ATT Inc |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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