Correlation Between ATT and First Trust

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

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

Diversification Opportunities for ATT and First Trust

0.87

Correlation Coefficient

ATT  First Trust

Very poor diversification

The 3 months correlation between ATT and First is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of ATT i.e., ATT and First Trust go up and down completely randomly.

Pair Corralation between ATT and First Trust

Taking into account the 90-day investment horizon ATT Inc is expected to generate 3.8 times more return on investment than First Trust. However, ATT is 3.8 times more volatile than First Trust Exchange Traded. It trades about 0.06 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.14 per unit of risk. If you would invest  1,629  in ATT Inc on September 16, 2024 and sell it today you would earn a total of  734.00  from holding ATT Inc or generate 45.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	92.54%
Values	Daily Returns

ATT Inc  vs.  First Trust Exchange Traded

ATT Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 7 (%) 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 January 2025.

First Trust Exchange

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ATT and First Trust

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

The idea behind ATT Inc and First Trust Exchange Traded 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.