Correlation Between ATT and American Nortel

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

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

Diversification Opportunities for ATT and American Nortel

-0.61

Correlation Coefficient

ATT  American Nortel

Excellent diversification

The 3 months correlation between ATT and American is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and American Nortel Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Nortel Comm 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 American Nortel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Nortel Comm has no effect on the direction of ATT i.e., ATT and American Nortel go up and down completely randomly.

Pair Corralation between ATT and American Nortel

Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.18 times more return on investment than American Nortel. However, ATT Inc is 5.64 times less risky than American Nortel. It trades about -0.19 of its potential returns per unit of risk. American Nortel Communications is currently generating about -0.08 per unit of risk. If you would invest  2,383  in ATT Inc on October 6, 2024 and sell it today you would lose (100.00) from holding ATT Inc or give up 4.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

ATT Inc  vs.  American Nortel Communications

ATT Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

American Nortel Comm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Nortel Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, American Nortel is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ATT and American Nortel

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

The idea behind ATT Inc and American Nortel Communications 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.