Correlation Between ATT and IShares Russell
Can any of the company-specific risk be diversified away by investing in both ATT and IShares Russell 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 IShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and iShares Russell 1000, you can compare the effects of market volatilities on ATT and IShares Russell 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 IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and IShares Russell.
Diversification Opportunities for ATT and IShares Russell
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ATT and IShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and iShares Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 1000 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 IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 1000 has no effect on the direction of ATT i.e., ATT and IShares Russell go up and down completely randomly.
Pair Corralation between ATT and IShares Russell
Taking into account the 90-day investment horizon ATT Inc is expected to generate 2.86 times more return on investment than IShares Russell. However, ATT is 2.86 times more volatile than iShares Russell 1000. It trades about -0.01 of its potential returns per unit of risk. iShares Russell 1000 is currently generating about -0.23 per unit of risk. If you would invest 2,299 in ATT Inc on September 18, 2024 and sell it today you would lose (16.00) from holding ATT Inc or give up 0.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. iShares Russell 1000
Performance |
| Timeline |
| ATT Inc |
| iShares Russell 1000 |
ATT and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and IShares Russell
The main advantage of trading using opposite ATT and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, IShares Russell 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 IShares Russell will offset losses from the drop in IShares Russell's long position.The idea behind ATT Inc and iShares Russell 1000 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.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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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