Correlation Between ATT and IShares BBB

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

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

Diversification Opportunities for ATT and IShares BBB

0.93

Correlation Coefficient

ATT  IShares BBB

Almost no diversification

The 3 months correlation between ATT and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and iShares BBB Rated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BBB Rated 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 IShares BBB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BBB Rated has no effect on the direction of ATT i.e., ATT and IShares BBB go up and down completely randomly.

Pair Corralation between ATT and IShares BBB

Taking into account the 90-day investment horizon ATT Inc is expected to generate 5.26 times more return on investment than IShares BBB. However, ATT is 5.26 times more volatile than iShares BBB Rated. It trades about 0.21 of its potential returns per unit of risk. iShares BBB Rated is currently generating about 0.1 per unit of risk. If you would invest  2,267  in ATT Inc on December 26, 2024 and sell it today you would earn a total of  464.00  from holding ATT Inc or generate 20.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

ATT Inc  vs.  iShares BBB Rated

ATT Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 16 (%) 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.

iShares BBB Rated

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares BBB Rated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, IShares BBB 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 IShares BBB

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

The idea behind ATT Inc and iShares BBB Rated 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.