Correlation Between ATT and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both ATT and SPDR Portfolio 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 SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and SPDR Portfolio Corporate, you can compare the effects of market volatilities on ATT and SPDR Portfolio 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 SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and SPDR Portfolio.
Diversification Opportunities for ATT and SPDR Portfolio
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ATT and SPDR is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and SPDR Portfolio Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Corporate 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 SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Corporate has no effect on the direction of ATT i.e., ATT and SPDR Portfolio go up and down completely randomly.
Pair Corralation between ATT and SPDR Portfolio
Taking into account the 90-day investment horizon ATT Inc is expected to generate 2.14 times more return on investment than SPDR Portfolio. However, ATT is 2.14 times more volatile than SPDR Portfolio Corporate. It trades about 0.18 of its potential returns per unit of risk. SPDR Portfolio Corporate is currently generating about 0.12 per unit of risk. If you would invest 2,192 in ATT Inc on September 4, 2024 and sell it today you would earn a total of 78.00 from holding ATT Inc or generate 3.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. SPDR Portfolio Corporate
Performance |
| Timeline |
| ATT Inc |
| SPDR Portfolio Corporate |
ATT and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and SPDR Portfolio
The main advantage of trading using opposite ATT and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, SPDR Portfolio 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 SPDR Portfolio will offset losses from the drop in SPDR Portfolio's long position.The idea behind ATT Inc and SPDR Portfolio Corporate 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.| SPDR Portfolio vs. SPDR Barclays Intermediate | SPDR Portfolio vs. SPDR Portfolio Intermediate | SPDR Portfolio vs. SPDR Portfolio Mortgage | SPDR Portfolio vs. SPDR Barclays Long |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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