Correlation Between ATT and Xtrackers FTSE

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

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

Diversification Opportunities for ATT and Xtrackers FTSE

0.77

Correlation Coefficient

ATT  Xtrackers FTSE

Poor diversification

The 3 months correlation between ATT and Xtrackers is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Xtrackers FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE Developed 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 Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE Developed has no effect on the direction of ATT i.e., ATT and Xtrackers FTSE go up and down completely randomly.

Pair Corralation between ATT and Xtrackers FTSE

Taking into account the 90-day investment horizon ATT Inc is expected to generate 1.88 times more return on investment than Xtrackers FTSE. However, ATT is 1.88 times more volatile than Xtrackers FTSE Developed. It trades about 0.26 of its potential returns per unit of risk. Xtrackers FTSE Developed is currently generating about 0.16 per unit of risk. If you would invest  2,232  in ATT Inc on December 28, 2024 and sell it today you would earn a total of  588.00  from holding ATT Inc or generate 26.34% 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.  Xtrackers FTSE Developed

ATT Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers FTSE Developed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers FTSE Developed are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Xtrackers FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ATT and Xtrackers FTSE

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

The idea behind ATT Inc and Xtrackers FTSE Developed 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.