Correlation Between ATT and Northern Lights
Can any of the company-specific risk be diversified away by investing in both ATT and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Northern Lights, you can compare the effects of market volatilities on ATT and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Northern Lights.
Diversification Opportunities for ATT and Northern Lights
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ATT and Northern is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of ATT i.e., ATT and Northern Lights go up and down completely randomly.
Pair Corralation between ATT and Northern Lights
Taking into account the 90-day investment horizon ATT Inc is expected to generate 1.98 times more return on investment than Northern Lights. However, ATT is 1.98 times more volatile than Northern Lights. It trades about 0.4 of its potential returns per unit of risk. Northern Lights is currently generating about 0.21 per unit of risk. If you would invest 2,232 in ATT Inc on November 30, 2024 and sell it today you would earn a total of 509.00 from holding ATT Inc or generate 22.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. Northern Lights
Performance |
| Timeline |
| ATT Inc |
| Northern Lights |
ATT and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Northern Lights
The main advantage of trading using opposite ATT and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.The idea behind ATT Inc and Northern Lights 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.| Northern Lights vs. Strategy Shares | Northern Lights vs. Freedom Day Dividend | Northern Lights vs. Franklin Templeton ETF | Northern Lights vs. iShares MSCI China |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |