Can any of the company-specific risk be diversified away by investing in both ATT and KonaTel 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 KonaTel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and KonaTel, you can compare the effects of market volatilities on ATT and KonaTel 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 KonaTel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and KonaTel.
The 3 months correlation between ATT and KonaTel is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and KonaTel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KonaTel 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 KonaTel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KonaTel has no effect on the direction of ATT i.e., ATT and KonaTel go up and down completely randomly.
Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.2 times more return on investment than KonaTel. However, ATT Inc is 4.95 times less risky than KonaTel. It trades about 0.06 of its potential returns per unit of risk. KonaTel is currently generating about -0.01 per unit of risk. If you would invest 1,655 in ATT Inc on March 6, 2024 and sell it today you would earn a total of 146.00 from holding ATT Inc or generate 8.82% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Compared to the overall equity markets, risk-adjusted returns on investments in KonaTel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, KonaTel disclosed solid returns over the last few months and may actually be approaching a breakup point.