Correlation Between ATT and Entergy Arkansas
Can any of the company-specific risk be diversified away by investing in both ATT and Entergy Arkansas 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 Entergy Arkansas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Entergy Arkansas LLC, you can compare the effects of market volatilities on ATT and Entergy Arkansas 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 Entergy Arkansas. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Entergy Arkansas.
Diversification Opportunities for ATT and Entergy Arkansas
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ATT and Entergy is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Entergy Arkansas LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Arkansas LLC 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 Entergy Arkansas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Arkansas LLC has no effect on the direction of ATT i.e., ATT and Entergy Arkansas go up and down completely randomly.
Pair Corralation between ATT and Entergy Arkansas
Considering the 90-day investment horizon ATT Inc is expected to generate 0.41 times more return on investment than Entergy Arkansas. However, ATT Inc is 2.43 times less risky than Entergy Arkansas. It trades about -0.06 of its potential returns per unit of risk. Entergy Arkansas LLC is currently generating about -0.15 per unit of risk. If you would invest 2,409 in ATT Inc on November 4, 2024 and sell it today you would lose (16.00) from holding ATT Inc or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. Entergy Arkansas LLC
Performance |
| Timeline |
| ATT Inc |
| Entergy Arkansas LLC |
ATT and Entergy Arkansas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Entergy Arkansas
The main advantage of trading using opposite ATT and Entergy Arkansas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Entergy Arkansas 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 Entergy Arkansas will offset losses from the drop in Entergy Arkansas' long position.The idea behind ATT Inc and Entergy Arkansas LLC 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.| Entergy Arkansas vs. Entergy Mississippi LLC | Entergy Arkansas vs. Entergy New Orleans | Entergy Arkansas vs. Entergy Louisiana LLC | Entergy Arkansas vs. Southern Co |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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