Correlation Between ATT and Star Fashion

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

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

Diversification Opportunities for ATT and Star Fashion

-0.37

Correlation Coefficient

ATT  Star Fashion

Very good diversification

The 3 months correlation between ATT and Star is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Star Fashion Culture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Fashion Culture 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 Star Fashion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Fashion Culture has no effect on the direction of ATT i.e., ATT and Star Fashion go up and down completely randomly.

Pair Corralation between ATT and Star Fashion

Taking into account the 90-day investment horizon ATT is expected to generate 5.15 times less return on investment than Star Fashion. But when comparing it to its historical volatility, ATT Inc is 5.79 times less risky than Star Fashion. It trades about 0.19 of its potential returns per unit of risk. Star Fashion Culture is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Star Fashion Culture on September 1, 2024 and sell it today you would earn a total of  159.00  from holding Star Fashion Culture or generate 39.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

ATT Inc  vs.  Star Fashion Culture

ATT Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Star Fashion Culture

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Star Fashion Culture are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Star Fashion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATT and Star Fashion

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

The idea behind ATT Inc and Star Fashion Culture 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.