Correlation Between ATT and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both ATT and Vanguard FTSE 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 Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Vanguard FTSE Europe, you can compare the effects of market volatilities on ATT and Vanguard FTSE 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 Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Vanguard FTSE.
Diversification Opportunities for ATT and Vanguard FTSE
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ATT and Vanguard is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Vanguard FTSE Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Europe 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Europe has no effect on the direction of ATT i.e., ATT and Vanguard FTSE go up and down completely randomly.
Pair Corralation between ATT and Vanguard FTSE
Taking into account the 90-day investment horizon ATT Inc is expected to generate 1.23 times more return on investment than Vanguard FTSE. However, ATT is 1.23 times more volatile than Vanguard FTSE Europe. It trades about 0.19 of its potential returns per unit of risk. Vanguard FTSE Europe is currently generating about -0.28 per unit of risk. If you would invest 2,211 in ATT Inc on August 28, 2024 and sell it today you would earn a total of 99.00 from holding ATT Inc or generate 4.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. Vanguard FTSE Europe
Performance |
| Timeline |
| ATT Inc |
| Vanguard FTSE Europe |
ATT and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Vanguard FTSE
The main advantage of trading using opposite ATT and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Vanguard FTSE 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.The idea behind ATT Inc and Vanguard FTSE Europe 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.| Vanguard FTSE vs. Vanguard FTSE Pacific | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard FTSE All World | Vanguard FTSE vs. Vanguard FTSE Developed |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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