Correlation Between Blue Bird and ATT

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

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

Diversification Opportunities for Blue Bird and ATT

0.01

Correlation Coefficient

Blue Bird  ATT

Significant diversification

The 3 months correlation between Blue and ATT is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Blue Bird Corp and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Blue Bird 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 Blue Bird Corp 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 Blue Bird i.e., Blue Bird and ATT go up and down completely randomly.

Pair Corralation between Blue Bird and ATT

Given the investment horizon of 90 days Blue Bird Corp is expected to generate 2.69 times more return on investment than ATT. However, Blue Bird is 2.69 times more volatile than ATT Inc. It trades about -0.03 of its potential returns per unit of risk. ATT Inc is currently generating about -0.11 per unit of risk. If you would invest  3,641  in Blue Bird Corp on February 4, 2024 and sell it today you would lose (101.00) from holding Blue Bird Corp or give up 2.77% of portfolio value over 90 days.

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

Blue Bird Corp  vs.  ATT Inc

Blue Bird Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Bird Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental drivers, Blue Bird exhibited solid returns over the last few months and may actually be approaching a breakup point.

ATT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Blue Bird and ATT

The main advantage of trading using opposite Blue Bird and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Bird 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 Blue Bird Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.