Correlation Between ATT and GMO Internet

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

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

Diversification Opportunities for ATT and GMO Internet

0.58

Correlation Coefficient

ATT  GMO Internet

Very weak diversification

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

Pair Corralation between ATT and GMO Internet

Assuming the 90 days trading horizon ATT is expected to generate 7.18 times less return on investment than GMO Internet. But when comparing it to its historical volatility, ATT Inc is 4.79 times less risky than GMO Internet. It trades about 0.05 of its potential returns per unit of risk. GMO Internet is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  246.00  in GMO Internet on September 28, 2024 and sell it today you would earn a total of  1,354  from holding GMO Internet or generate 550.41% return on investment over 90 days.

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

ATT Inc  vs.  GMO Internet

ATT Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, ATT reported solid returns over the last few months and may actually be approaching a breakup point.

GMO Internet

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ATT and GMO Internet

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

The idea behind ATT Inc and GMO Internet 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.