Correlation Between ATT and Transamerica Capital

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

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

Diversification Opportunities for ATT and Transamerica Capital

0.89

Correlation Coefficient

ATT  Transamerica Capital

Very poor diversification

The 3 months correlation between ATT and Transamerica is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Transamerica Capital Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Capital 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 Transamerica Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Capital has no effect on the direction of ATT i.e., ATT and Transamerica Capital go up and down completely randomly.

Pair Corralation between ATT and Transamerica Capital

Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.48 times more return on investment than Transamerica Capital. However, ATT Inc is 2.07 times less risky than Transamerica Capital. It trades about -0.17 of its potential returns per unit of risk. Transamerica Capital Growth is currently generating about -0.08 per unit of risk. If you would invest  2,337  in ATT Inc on October 8, 2024 and sell it today you would lose (77.00) from holding ATT Inc or give up 3.29% of portfolio value over 90 days.

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

ATT Inc  vs.  Transamerica Capital Growth

ATT Inc

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 4 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Transamerica Capital

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Capital Growth are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Transamerica Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATT and Transamerica Capital

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

The idea behind ATT Inc and Transamerica Capital Growth 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.