Correlation Between HP and ATT

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

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

Diversification Opportunities for HP and ATT

0.53

Correlation Coefficient

HP  ATT

Very weak diversification

The 3 months correlation between HP and ATT is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and HP 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 HP Inc 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 HP i.e., HP and ATT go up and down completely randomly.

Pair Corralation between HP and ATT

Considering the 90-day investment horizon HP is expected to generate 1.09 times less return on investment than ATT. In addition to that, HP is 1.21 times more volatile than ATT Inc. It trades about 0.04 of its total potential returns per unit of risk. ATT Inc is currently generating about 0.05 per unit of volatility. If you would invest  1,705  in ATT Inc on August 31, 2024 and sell it today you would earn a total of  611.00  from holding ATT Inc or generate 35.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

HP Inc  vs.  ATT Inc

HP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

ATT Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively sluggish basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HP and ATT

The main advantage of trading using opposite HP and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.