Correlation Between ATT and SoftBank Group

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

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

Diversification Opportunities for ATT and SoftBank Group

0.55

Correlation Coefficient

ATT  SoftBank Group

Very weak diversification

The 3 months correlation between ATT and SoftBank is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and SoftBank Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftBank Group Corp 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 SoftBank Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftBank Group Corp has no effect on the direction of ATT i.e., ATT and SoftBank Group go up and down completely randomly.

Pair Corralation between ATT and SoftBank Group

Assuming the 90 days trading horizon ATT Inc is expected to generate 0.66 times more return on investment than SoftBank Group. However, ATT Inc is 1.52 times less risky than SoftBank Group. It trades about -0.02 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about -0.03 per unit of risk. If you would invest  2,196  in ATT Inc on September 24, 2024 and sell it today you would lose (14.00) from holding ATT Inc or give up 0.64% of portfolio value over 90 days.

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

ATT Inc  vs.  SoftBank Group Corp

ATT Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 12 (%) 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.

SoftBank Group Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SoftBank Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATT and SoftBank Group

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

The idea behind ATT Inc and SoftBank Group Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.