Correlation Between ATT and WILLIS LEASE
Can any of the company-specific risk be diversified away by investing in both ATT and WILLIS LEASE 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 WILLIS LEASE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and WILLIS LEASE FIN, you can compare the effects of market volatilities on ATT and WILLIS LEASE 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 WILLIS LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and WILLIS LEASE.
Diversification Opportunities for ATT and WILLIS LEASE
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ATT and WILLIS is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN 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 WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of ATT i.e., ATT and WILLIS LEASE go up and down completely randomly.
Pair Corralation between ATT and WILLIS LEASE
Assuming the 90 days trading horizon ATT Inc is expected to generate 0.45 times more return on investment than WILLIS LEASE. However, ATT Inc is 2.24 times less risky than WILLIS LEASE. It trades about 0.21 of its potential returns per unit of risk. WILLIS LEASE FIN is currently generating about 0.06 per unit of risk. If you would invest 2,098 in ATT Inc on September 12, 2024 and sell it today you would earn a total of 126.00 from holding ATT Inc or generate 6.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. WILLIS LEASE FIN
Performance |
| Timeline |
| ATT Inc |
| WILLIS LEASE FIN |
ATT and WILLIS LEASE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and WILLIS LEASE
The main advantage of trading using opposite ATT and WILLIS LEASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, WILLIS LEASE 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 WILLIS LEASE will offset losses from the drop in WILLIS LEASE's long position.The idea behind ATT Inc and WILLIS LEASE FIN 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.| WILLIS LEASE vs. United Rentals | WILLIS LEASE vs. WillScot Mobile Mini | WILLIS LEASE vs. Superior Plus Corp | WILLIS LEASE vs. SIVERS SEMICONDUCTORS AB |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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