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 NASDAQ 100, 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

0.69

Correlation Coefficient

ATT  First Trust

Poor diversification

The 3 months correlation between ATT and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and First Trust NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ 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 NASDAQ 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 under-perform the First Trust. In addition to that, ATT is 1.09 times more volatile than First Trust NASDAQ 100. It trades about -0.08 of its total potential returns per unit of risk. First Trust NASDAQ 100 is currently generating about 0.16 per unit of volatility. If you would invest  9,385  in First Trust NASDAQ 100 on October 22, 2024 and sell it today you would earn a total of  192.00  from holding First Trust NASDAQ 100 or generate 2.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

ATT Inc  vs.  First Trust NASDAQ 100

ATT Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ATT is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust NASDAQ

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ 100 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 NASDAQ 100 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.