Correlation Between ATT and Procter Gamble

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

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

Diversification Opportunities for ATT and Procter Gamble

0.48

Correlation Coefficient

ATT  Procter Gamble

Very weak diversification

The 3 months correlation between ATT and Procter is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Procter Gamble DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble DRC 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble DRC has no effect on the direction of ATT i.e., ATT and Procter Gamble go up and down completely randomly.

Pair Corralation between ATT and Procter Gamble

Given the investment horizon of 90 days ATT Inc is expected to generate 1.06 times more return on investment than Procter Gamble. However, ATT is 1.06 times more volatile than Procter Gamble DRC. It trades about 0.19 of its potential returns per unit of risk. Procter Gamble DRC is currently generating about 0.0 per unit of risk. If you would invest  45,911  in ATT Inc on December 28, 2024 and sell it today you would earn a total of  11,786  from holding ATT Inc or generate 25.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

ATT Inc  vs.  Procter Gamble DRC

ATT Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, ATT showed solid returns over the last few months and may actually be approaching a breakup point.

Procter Gamble DRC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Procter Gamble DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ATT and Procter Gamble

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

The idea behind ATT Inc and Procter Gamble DRC 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 Directory module to find actively traded commodities issued by global exchanges.