Correlation Between Bread Financial and Atmos Energy

Can any of the company-specific risk be diversified away by investing in both Bread Financial and Atmos Energy 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 Bread Financial and Atmos Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bread Financial Holdings and Atmos Energy, you can compare the effects of market volatilities on Bread Financial and Atmos Energy 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 Bread Financial with a short position of Atmos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Atmos Energy.

Diversification Opportunities for Bread Financial and Atmos Energy

0.96

Correlation Coefficient

Bread Financial  Atmos Energy

Almost no diversification

The 3 months correlation between Bread and Atmos is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of Bread Financial i.e., Bread Financial and Atmos Energy go up and down completely randomly.

Pair Corralation between Bread Financial and Atmos Energy

Assuming the 90 days trading horizon Bread Financial Holdings is expected to under-perform the Atmos Energy. In addition to that, Bread Financial is 5.19 times more volatile than Atmos Energy. It trades about -0.14 of its total potential returns per unit of risk. Atmos Energy is currently generating about 0.35 per unit of volatility. If you would invest  42,000  in Atmos Energy on October 8, 2024 and sell it today you would earn a total of  588.00  from holding Atmos Energy or generate 1.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Bread Financial Holdings  vs.  Atmos Energy

Bread Financial Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Atmos Energy

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Atmos Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bread Financial and Atmos Energy

The main advantage of trading using opposite Bread Financial and Atmos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial position performs unexpectedly, Atmos Energy 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 Atmos Energy will offset losses from the drop in Atmos Energy's long position.

The idea behind Bread Financial Holdings and Atmos Energy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.