Correlation Between Disney and ATT

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

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

Diversification Opportunities for Disney and ATT

-0.45

Correlation Coefficient

Disney  ATT

Very good diversification

The 3 months correlation between Disney and ATT is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Disney 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 Walt Disney 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 Disney i.e., Disney and ATT go up and down completely randomly.

Pair Corralation between Disney and ATT

Considering the 90-day investment horizon Walt Disney is expected to under-perform the ATT. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.09 times less risky than ATT. The stock trades about -0.11 of its potential returns per unit of risk. The ATT Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,267  in ATT Inc on December 26, 2024 and sell it today you would earn a total of  464.00  from holding ATT Inc or generate 20.47% return on investment over 90 days.

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

Walt Disney  vs.  ATT Inc

Walt Disney

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ATT Inc

Risk-Adjusted Performance

Solid

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 Disney and ATT

The main advantage of trading using opposite Disney and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.