Correlation Between Northrop Grumman and ATT
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman 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 Northrop Grumman and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and ATT Inc, you can compare the effects of market volatilities on Northrop Grumman 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 Northrop Grumman with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and ATT.
Diversification Opportunities for Northrop Grumman and ATT
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Northrop and ATT is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Northrop Grumman 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 Northrop Grumman 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 Northrop Grumman i.e., Northrop Grumman and ATT go up and down completely randomly.
Pair Corralation between Northrop Grumman and ATT
Considering the 90-day investment horizon Northrop Grumman is expected to generate 0.97 times more return on investment than ATT. However, Northrop Grumman is 1.03 times less risky than ATT. It trades about 0.01 of its potential returns per unit of risk. ATT Inc is currently generating about 0.0 per unit of risk. If you would invest 45,444 in Northrop Grumman on January 26, 2024 and sell it today you would earn a total of 2,013 from holding Northrop Grumman or generate 4.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Northrop Grumman vs. ATT Inc
Performance |
Timeline |
Northrop Grumman |
ATT Inc |
Northrop Grumman and ATT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Northrop Grumman and ATT
The main advantage of trading using opposite Northrop Grumman and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman 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.Northrop Grumman vs. Novocure | Northrop Grumman vs. HubSpot | Northrop Grumman vs. DigitalOcean Holdings | Northrop Grumman vs. Appian Corp |
Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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