Correlation Between ATT and Cascades
Can any of the company-specific risk be diversified away by investing in both ATT and Cascades 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 Cascades into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Cascades, you can compare the effects of market volatilities on ATT and Cascades 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 Cascades. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Cascades.
Diversification Opportunities for ATT and Cascades
Poor diversification
The 3 months correlation between ATT and Cascades is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Cascades in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cascades 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 Cascades. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cascades has no effect on the direction of ATT i.e., ATT and Cascades go up and down completely randomly.
Pair Corralation between ATT and Cascades
Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.46 times more return on investment than Cascades. However, ATT Inc is 2.16 times less risky than Cascades. It trades about 0.12 of its potential returns per unit of risk. Cascades is currently generating about 0.01 per unit of risk. If you would invest 1,594 in ATT Inc on September 3, 2024 and sell it today you would earn a total of 676.00 from holding ATT Inc or generate 42.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 78.54% |
| Values | Daily Returns |
ATT Inc vs. Cascades
Performance |
| Timeline |
| ATT Inc |
| Cascades |
ATT and Cascades Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Cascades
The main advantage of trading using opposite ATT and Cascades positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Cascades 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 Cascades will offset losses from the drop in Cascades' long position.| ATT vs. Highway Holdings Limited | ATT vs. QCR Holdings | ATT vs. Partner Communications | ATT vs. Acumen Pharmaceuticals |
| Cascades vs. TriMas | Cascades vs. Myers Industries | Cascades vs. Reynolds Consumer Products | Cascades vs. Pactiv Evergreen |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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