Correlation Between ATT and Meta Platforms

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

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

Diversification Opportunities for ATT and Meta Platforms

0.06

Correlation Coefficient

ATT  Meta Platforms

Significant diversification

The 3 months correlation between ATT and Meta is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of ATT i.e., ATT and Meta Platforms go up and down completely randomly.

Pair Corralation between ATT and Meta Platforms

Taking into account the 90-day investment horizon ATT Inc is expected to under-perform the Meta Platforms. But the stock apears to be less risky and, when comparing its historical volatility, ATT Inc is 1.55 times less risky than Meta Platforms. The stock trades about -0.19 of its potential returns per unit of risk. The Meta Platforms is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  50,552  in Meta Platforms on January 20, 2024 and sell it today you would lose (372.00) from holding Meta Platforms or give up 0.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

ATT Inc  vs.  Meta Platforms

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Meta Platforms

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Platforms are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Meta Platforms sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATT and Meta Platforms

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

The idea behind ATT Inc and Meta Platforms 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..