Correlation Between Energy Select and ATT
Can any of the company-specific risk be diversified away by investing in both Energy Select and ATT 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 Energy Select and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Select Sector and ATT Inc, you can compare the effects of market volatilities on Energy Select and ATT 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 Energy Select with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Select and ATT.
Diversification Opportunities for Energy Select and ATT
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Energy and ATT is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Energy Select Sector and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Energy Select 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 Energy Select Sector are associated (or correlated) with ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Energy Select i.e., Energy Select and ATT go up and down completely randomly.
Pair Corralation between Energy Select and ATT
Considering the 90-day investment horizon Energy Select Sector is expected to generate 0.92 times more return on investment than ATT. However, Energy Select Sector is 1.09 times less risky than ATT. It trades about 0.26 of its potential returns per unit of risk. ATT Inc is currently generating about -0.26 per unit of risk. If you would invest 9,114 in Energy Select Sector on January 17, 2024 and sell it today you would earn a total of 409.00 from holding Energy Select Sector or generate 4.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Energy Select Sector vs. ATT Inc
Performance |
| Timeline |
| Energy Select Sector |
| ATT Inc |
Energy Select and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Select and ATT
The main advantage of trading using opposite Energy Select and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Select position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.| Energy Select vs. Invesco DWA Utilities | Energy Select vs. HUMANA INC | Energy Select vs. Aquagold International | Energy Select vs. Morningstar Unconstrained Allocation |
| ATT vs. Aquagold International | ATT vs. Thrivent High Yield | ATT vs. Morningstar Unconstrained Allocation | ATT vs. Via Renewables |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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