Correlation Between ATT and Innovator
Can any of the company-specific risk be diversified away by investing in both ATT and Innovator 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 Innovator into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Innovator SP 500, you can compare the effects of market volatilities on ATT and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Innovator.
Diversification Opportunities for ATT and Innovator
Poor diversification
The 3 months correlation between ATT and Innovator is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of ATT i.e., ATT and Innovator go up and down completely randomly.
Pair Corralation between ATT and Innovator
Taking into account the 90-day investment horizon ATT Inc is expected to generate 3.63 times more return on investment than Innovator. However, ATT is 3.63 times more volatile than Innovator SP 500. It trades about 0.2 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.13 per unit of risk. If you would invest 1,680 in ATT Inc on August 24, 2024 and sell it today you would earn a total of 618.00 from holding ATT Inc or generate 36.79% 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. Innovator SP 500
Performance |
Timeline |
ATT Inc |
Innovator SP 500 |
ATT and Innovator Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ATT and Innovator
The main advantage of trading using opposite ATT and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Innovator 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 Innovator will offset losses from the drop in Innovator's long position.ATT vs. Small Cap Core | ATT vs. FitLife Brands, Common | ATT vs. Mutual Of America | ATT vs. Gfl Environmental Holdings |
Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 |
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 Stocks Directory module to find actively traded stocks across global markets.
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