Correlation Between ATT and Continental
Can any of the company-specific risk be diversified away by investing in both ATT and Continental 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 Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Continental AG PK, you can compare the effects of market volatilities on ATT and Continental 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 Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Continental.
Diversification Opportunities for ATT and Continental
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ATT and Continental is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Continental AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental AG PK 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 Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental AG PK has no effect on the direction of ATT i.e., ATT and Continental go up and down completely randomly.
Pair Corralation between ATT and Continental
Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.5 times more return on investment than Continental. However, ATT Inc is 2.0 times less risky than Continental. It trades about 0.92 of its potential returns per unit of risk. Continental AG PK is currently generating about 0.04 per unit of risk. If you would invest 2,373 in ATT Inc on December 2, 2024 and sell it today you would earn a total of 368.00 from holding ATT Inc or generate 15.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
ATT Inc vs. Continental AG PK
Performance |
Timeline |
ATT Inc |
Continental AG PK |
ATT and Continental Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ATT and Continental
The main advantage of trading using opposite ATT and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.The idea behind ATT Inc and Continental AG PK 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.Continental vs. Compagnie Gnrale des | Continental vs. Bridgestone Corp ADR | Continental vs. Continental Aktiengesellschaft | Continental vs. Douglas Dynamics |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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