Correlation Between ATT and Gaia
Can any of the company-specific risk be diversified away by investing in both ATT and Gaia 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 Gaia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Gaia Inc, you can compare the effects of market volatilities on ATT and Gaia 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 Gaia. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Gaia.
Diversification Opportunities for ATT and Gaia
Poor diversification
The 3 months correlation between ATT and Gaia is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Gaia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaia Inc 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 Gaia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaia Inc has no effect on the direction of ATT i.e., ATT and Gaia go up and down completely randomly.
Pair Corralation between ATT and Gaia
Taking into account the 90-day investment horizon ATT is expected to generate 2.14 times less return on investment than Gaia. But when comparing it to its historical volatility, ATT Inc is 2.61 times less risky than Gaia. It trades about 0.24 of its potential returns per unit of risk. Gaia Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 544.00 in Gaia Inc on August 31, 2024 and sell it today you would earn a total of 65.00 from holding Gaia Inc or generate 11.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. Gaia Inc
Performance |
| Timeline |
| ATT Inc |
| Gaia Inc |
ATT and Gaia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Gaia
The main advantage of trading using opposite ATT and Gaia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Gaia 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 Gaia will offset losses from the drop in Gaia's long position.| ATT vs. RLJ Lodging Trust | ATT vs. Aquagold International | ATT vs. Stepstone Group | ATT vs. Morningstar Unconstrained Allocation |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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