Correlation Between ATT and Structured Products

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

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

Diversification Opportunities for ATT and Structured Products

0.03

Correlation Coefficient

ATT  Structured Products

Significant diversification

The 3 months correlation between ATT and Structured is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Structured Products Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Structured Products Corp 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 Structured Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Structured Products Corp has no effect on the direction of ATT i.e., ATT and Structured Products go up and down completely randomly.

Pair Corralation between ATT and Structured Products

Considering the 90-day investment horizon ATT Inc is expected to under-perform the Structured Products. But the stock apears to be less risky and, when comparing its historical volatility, ATT Inc is 1.7 times less risky than Structured Products. The stock trades about -0.14 of its potential returns per unit of risk. The Structured Products Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,907  in Structured Products Corp on December 28, 2024 and sell it today you would earn a total of  8.00  from holding Structured Products Corp or generate 0.28% return on investment over 90 days.

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

ATT Inc  vs.  Structured Products Corp

ATT Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, ATT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Structured Products Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Structured Products Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Structured Products is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ATT and Structured Products

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

The idea behind ATT Inc and Structured Products Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.