Correlation Between Ford and ATT

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

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

Diversification Opportunities for Ford and ATT

0.46

Correlation Coefficient

Ford  ATT

Very weak diversification

The 3 months correlation between Ford and ATT is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Ford 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 Ford Motor 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 Ford i.e., Ford and ATT go up and down completely randomly.

Pair Corralation between Ford and ATT

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the ATT. In addition to that, Ford is 2.25 times more volatile than ATT Inc. It trades about -0.05 of its total potential returns per unit of risk. ATT Inc is currently generating about 0.16 per unit of volatility. If you would invest  1,677  in ATT Inc on April 27, 2024 and sell it today you would earn a total of  224.00  from holding ATT Inc or generate 13.36% return on investment over 90 days.

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

Ford Motor  vs.  ATT Inc

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ATT Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and ATT

The main advantage of trading using opposite Ford and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.