Correlation Between ATT and DISCOVERY

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

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

Diversification Opportunities for ATT and DISCOVERY

-0.06

Correlation Coefficient

ATT  DISCOVERY

Good diversification

The 3 months correlation between ATT and DISCOVERY is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and DISCOVERY MUNICATIONS LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISCOVERY MUNICATIONS LLC 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 DISCOVERY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISCOVERY MUNICATIONS LLC has no effect on the direction of ATT i.e., ATT and DISCOVERY go up and down completely randomly.

Pair Corralation between ATT and DISCOVERY

Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.58 times more return on investment than DISCOVERY. However, ATT Inc is 1.72 times less risky than DISCOVERY. It trades about 0.09 of its potential returns per unit of risk. DISCOVERY MUNICATIONS LLC is currently generating about -0.15 per unit of risk. If you would invest  2,199  in ATT Inc on September 14, 2024 and sell it today you would earn a total of  149.00  from holding ATT Inc or generate 6.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	46.03%
Values	Daily Returns

ATT Inc  vs.  DISCOVERY MUNICATIONS LLC

ATT Inc

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 6 (%) 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.

DISCOVERY MUNICATIONS LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DISCOVERY MUNICATIONS LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for DISCOVERY MUNICATIONS LLC investors.

Pair Trading with ATT and DISCOVERY

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

The idea behind ATT Inc and DISCOVERY MUNICATIONS LLC 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.