Correlation Between ATT and ARB
Can any of the company-specific risk be diversified away by investing in both ATT and ARB 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 ARB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and ARB Limited, you can compare the effects of market volatilities on ATT and ARB 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 ARB. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and ARB.
Diversification Opportunities for ATT and ARB
Pay attention - limited upside
The 3 months correlation between ATT and ARB is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and ARB Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARB Limited 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 ARB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARB Limited has no effect on the direction of ATT i.e., ATT and ARB go up and down completely randomly.
Pair Corralation between ATT and ARB
Taking into account the 90-day investment horizon ATT is expected to generate 1.19 times less return on investment than ARB. In addition to that, ATT is 1.21 times more volatile than ARB Limited. It trades about 0.05 of its total potential returns per unit of risk. ARB Limited is currently generating about 0.07 per unit of volatility. If you would invest 1,873 in ARB Limited on September 2, 2024 and sell it today you would earn a total of 619.00 from holding ARB Limited or generate 33.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 72.38% |
| Values | Daily Returns |
ATT Inc vs. ARB Limited
Performance |
| Timeline |
| ATT Inc |
| ARB Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
ATT and ARB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and ARB
The main advantage of trading using opposite ATT and ARB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, ARB 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 ARB will offset losses from the drop in ARB's long position.The idea behind ATT Inc and ARB Limited 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.| ARB vs. Bank of America | ARB vs. Skillful Craftsman Education | ARB vs. Old Dominion Freight | ARB vs. PennantPark Investment |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |