Correlation Between ATT and Cable One

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

By analyzing existing cross correlation between ATT Inc and Cable One, you can compare the effects of market volatilities on ATT and Cable One 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 Cable One. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Cable One.

Diversification Opportunities for ATT and Cable One

0.9

Correlation Coefficient

ATT  Cable One

Almost no diversification

The 3 months correlation between ATT and Cable is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One 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 Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of ATT i.e., ATT and Cable One go up and down completely randomly.

Pair Corralation between ATT and Cable One

Assuming the 90 days trading horizon ATT Inc is expected to generate 0.62 times more return on investment than Cable One. However, ATT Inc is 1.6 times less risky than Cable One. It trades about 0.16 of its potential returns per unit of risk. Cable One is currently generating about 0.07 per unit of risk. If you would invest  3,295  in ATT Inc on September 22, 2024 and sell it today you would earn a total of  1,320  from holding ATT Inc or generate 40.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.22%
Values	Daily Returns

ATT Inc  vs.  Cable One

ATT Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ATT sustained solid returns over the last few months and may actually be approaching a breakup point.

Cable One

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cable One sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATT and Cable One

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

The idea behind ATT Inc and Cable One 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.