Correlation Between ATT and SPDR SP

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

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

Diversification Opportunities for ATT and SPDR SP

-0.5

Correlation Coefficient

ATT  SPDR SP

Very good diversification

The 3 months correlation between ATT and SPDR is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and SPDR SP Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Biotech 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Biotech has no effect on the direction of ATT i.e., ATT and SPDR SP go up and down completely randomly.

Pair Corralation between ATT and SPDR SP

Taking into account the 90-day investment horizon ATT Inc is expected to generate 1.07 times more return on investment than SPDR SP. However, ATT is 1.07 times more volatile than SPDR SP Biotech. It trades about 0.21 of its potential returns per unit of risk. SPDR SP Biotech is currently generating about -0.06 per unit of risk. If you would invest  2,267  in ATT Inc on December 25, 2024 and sell it today you would earn a total of  464.00  from holding ATT Inc or generate 20.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ATT Inc  vs.  SPDR SP Biotech

ATT Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

SPDR SP Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, SPDR SP is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ATT and SPDR SP

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

The idea behind ATT Inc and SPDR SP Biotech 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.