Correlation Between American Funds and ATT

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

By analyzing existing cross correlation between American Funds 2010 and ATT Inc, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and ATT.

Diversification Opportunities for American Funds and ATT

0.41

Correlation Coefficient

American Funds  ATT

Very weak diversification

The 3 months correlation between American and ATT is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2010 and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and American Funds 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 American Funds 2010 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 American Funds i.e., American Funds and ATT go up and down completely randomly.

Pair Corralation between American Funds and ATT

Assuming the 90 days horizon American Funds 2010 is expected to generate 0.29 times more return on investment than ATT. However, American Funds 2010 is 3.42 times less risky than ATT. It trades about 0.06 of its potential returns per unit of risk. ATT Inc is currently generating about 0.0 per unit of risk. If you would invest  1,048  in American Funds 2010 on January 24, 2024 and sell it today you would earn a total of  92.00  from holding American Funds 2010 or generate 8.78% return on investment over 90 days.

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

American Funds 2010  vs.  ATT Inc

American Funds 2010

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds 2010 are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ATT Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ATT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with American Funds and ATT

The main advantage of trading using opposite American Funds and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.

The idea behind American Funds 2010 and ATT Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.