Correlation Between ATT and OCCIDENTAL

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

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

Diversification Opportunities for ATT and OCCIDENTAL

-0.19

Correlation Coefficient

ATT  OCCIDENTAL

Good diversification

The 3 months correlation between ATT and OCCIDENTAL is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and OCCIDENTAL PETE P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OCCIDENTAL PETE P 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 OCCIDENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OCCIDENTAL PETE P has no effect on the direction of ATT i.e., ATT and OCCIDENTAL go up and down completely randomly.

Pair Corralation between ATT and OCCIDENTAL

Taking into account the 90-day investment horizon ATT is expected to generate 64.2 times less return on investment than OCCIDENTAL. But when comparing it to its historical volatility, ATT Inc is 1.99 times less risky than OCCIDENTAL. It trades about 0.01 of its potential returns per unit of risk. OCCIDENTAL PETE P is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  7,480  in OCCIDENTAL PETE P on October 20, 2024 and sell it today you would earn a total of  463.00  from holding OCCIDENTAL PETE P or generate 6.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

ATT Inc  vs.  OCCIDENTAL PETE P

ATT Inc

Risk-Adjusted Performance

4 of 100

Insignificant

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.

OCCIDENTAL PETE P

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in OCCIDENTAL PETE P are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, OCCIDENTAL 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 OCCIDENTAL

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

The idea behind ATT Inc and OCCIDENTAL PETE P 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 CEOs Directory module to screen CEOs from public companies around the world.