Correlation Between Independent Bank and ATT

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

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

Diversification Opportunities for Independent Bank and ATT

0.04

Correlation Coefficient

Independent Bank  ATT

Significant diversification

The 3 months correlation between Independent and ATT is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Independent Bank 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 Independent Bank 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 Independent Bank i.e., Independent Bank and ATT go up and down completely randomly.

Pair Corralation between Independent Bank and ATT

Given the investment horizon of 90 days Independent Bank is expected to under-perform the ATT. In addition to that, Independent Bank is 1.52 times more volatile than ATT Inc. It trades about -0.04 of its total potential returns per unit of risk. ATT Inc is currently generating about -0.02 per unit of volatility. If you would invest  1,856  in ATT Inc on January 24, 2024 and sell it today you would lose (225.00) from holding ATT Inc or give up 12.12% of portfolio value over 90 days.

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

Independent Bank  vs.  ATT Inc

Independent Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Independent Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Independent Bank and ATT

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