Correlation Between ATT and WH Group

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

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

Diversification Opportunities for ATT and WH Group

0.59

Correlation Coefficient

ATT  WH Group

Very weak diversification

The 3 months correlation between ATT and WHGRF is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and WH Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WH Group Limited 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 WH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WH Group Limited has no effect on the direction of ATT i.e., ATT and WH Group go up and down completely randomly.

Pair Corralation between ATT and WH Group

Taking into account the 90-day investment horizon ATT is expected to generate 106.41 times less return on investment than WH Group. But when comparing it to its historical volatility, ATT Inc is 34.54 times less risky than WH Group. It trades about 0.05 of its potential returns per unit of risk. WH Group Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  63.00  in WH Group Limited on September 7, 2024 and sell it today you would earn a total of  16.00  from holding WH Group Limited or generate 25.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	64.36%
Values	Daily Returns

ATT Inc  vs.  WH Group Limited

ATT Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WH Group Limited

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WH Group Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, WH Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATT and WH Group

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

The idea behind ATT Inc and WH Group Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.