Correlation Between ATT and Ford

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

Diversification Opportunities for ATT and Ford

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ATT and Ford is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of ATT i.e., ATT and Ford go up and down completely randomly.

Pair Corralation between ATT and Ford

Taking into account the 90-day investment horizon ATT is expected to generate 7.49 times less return on investment than Ford. But when comparing it to its historical volatility, ATT Inc is 1.92 times less risky than Ford. It trades about 0.01 of its potential returns per unit of risk. Ford Motor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  860.00  in Ford Motor on September 10, 2022 and sell it today you would earn a total of  458.00  from holding Ford Motor or generate 53.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  Ford Motor

 Performance (%) 
       Timeline  
ATT Inc 
ATT Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in January 2023.

ATT Price Channel

Ford Motor 
Ford Performance
0 of 100
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ford Price Channel

ATT and Ford Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and Ford

The main advantage of trading using opposite ATT and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.
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The idea behind ATT Inc and Ford Motor 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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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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