Correlation Between BCM Resources and ATT

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

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

Diversification Opportunities for BCM Resources and ATT

0.58

Correlation Coefficient

BCM Resources  ATT

Very weak diversification

The 3 months correlation between BCM and ATT is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BCM Resources and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and BCM Resources 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 BCM Resources are associated (or correlated) with ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of BCM Resources i.e., BCM Resources and ATT go up and down completely randomly.

Pair Corralation between BCM Resources and ATT

Assuming the 90 days horizon BCM Resources is expected to generate 16.17 times more return on investment than ATT. However, BCM Resources is 16.17 times more volatile than ATT Inc. It trades about 0.17 of its potential returns per unit of risk. ATT Inc is currently generating about 0.21 per unit of risk. If you would invest  2.07  in BCM Resources on December 25, 2024 and sell it today you would earn a total of  5.93  from holding BCM Resources or generate 286.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

BCM Resources  vs.  ATT Inc

BCM Resources

Risk-Adjusted Performance

Good

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

ATT Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCM Resources and ATT

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

The idea behind BCM Resources and ATT Inc 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.

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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.