Correlation Between ATT and Alphabet

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

By analyzing existing cross correlation between ATT Inc and Alphabet Inc Class A, you can compare the effects of market volatilities on ATT and Alphabet 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 Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Alphabet.

Diversification Opportunities for ATT and Alphabet

-0.13

Correlation Coefficient

ATT  Alphabet

Good diversification

The 3 months correlation between ATT and Alphabet is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Alphabet Inc Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of ATT i.e., ATT and Alphabet go up and down completely randomly.

Pair Corralation between ATT and Alphabet

Taking into account the 90-day investment horizon ATT Inc is expected to under-perform the Alphabet. But the stock apears to be less risky and, when comparing its historical volatility, ATT Inc is 1.27 times less risky than Alphabet. The stock trades about -0.02 of its potential returns per unit of risk. The Alphabet Inc Class A is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  15,067  in Alphabet Inc Class A on January 26, 2024 and sell it today you would earn a total of  846.00  from holding Alphabet Inc Class A or generate 5.61% return on investment over 90 days.

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

ATT Inc  vs.  Alphabet Inc Class A

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.

Alphabet Class A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Alphabet is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ATT and Alphabet

The main advantage of trading using opposite ATT and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.

The idea behind ATT Inc and Alphabet Inc Class A 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.