Correlation Between Piedmont Lithium and ATT

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

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

Diversification Opportunities for Piedmont Lithium and ATT

-0.64

Correlation Coefficient

Piedmont Lithium  ATT

Excellent diversification

The 3 months correlation between Piedmont and ATT is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Piedmont Lithium and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Piedmont Lithium 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 Piedmont Lithium 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 Piedmont Lithium i.e., Piedmont Lithium and ATT go up and down completely randomly.

Pair Corralation between Piedmont Lithium and ATT

Assuming the 90 days horizon Piedmont Lithium is expected to generate 8.31 times more return on investment than ATT. However, Piedmont Lithium is 8.31 times more volatile than ATT Inc. It trades about 0.03 of its potential returns per unit of risk. ATT Inc is currently generating about 0.21 per unit of risk. If you would invest  8.28  in Piedmont Lithium on December 27, 2024 and sell it today you would lose (1.54) from holding Piedmont Lithium or give up 18.6% of portfolio value over 90 days.

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

Piedmont Lithium  vs.  ATT Inc

Piedmont Lithium

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Piedmont Lithium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Piedmont Lithium disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 Piedmont Lithium and ATT

The main advantage of trading using opposite Piedmont Lithium and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Piedmont Lithium 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 Piedmont Lithium 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.