Correlation Between ATT and EBay

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Can any of the company-specific risk be diversified away by investing in both ATT and EBay 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 ATT and EBay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and EBay Inc, you can compare the effects of market volatilities on ATT and EBay 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 ATT with a short position of EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and EBay.

Diversification Opportunities for ATT and EBay

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between ATT and EBay is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and EBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBay Inc and ATT 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 ATT Inc are associated (or correlated) with EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBay Inc has no effect on the direction of ATT i.e., ATT and EBay go up and down completely randomly.

Pair Corralation between ATT and EBay

Taking into account the 90-day investment horizon ATT is expected to generate 2.75 times less return on investment than EBay. But when comparing it to its historical volatility, ATT Inc is 1.39 times less risky than EBay. It trades about 0.18 of its potential returns per unit of risk. EBay Inc is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  4,764  in EBay Inc on December 30, 2023 and sell it today you would earn a total of  514.00  from holding EBay Inc or generate 10.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  EBay Inc

 Performance 
       Timeline  
ATT Inc 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 4 (%) 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.
EBay Inc 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in EBay Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, EBay showed solid returns over the last few months and may actually be approaching a breakup point.

ATT and EBay Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and EBay

The main advantage of trading using opposite ATT and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.
The idea behind ATT Inc and EBay 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.
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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