Correlation Between ATT and Twitter

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

Diversification Opportunities for ATT and Twitter

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between ATT and Twitter is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Twitter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twitter 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 Twitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twitter has no effect on the direction of ATT i.e., ATT and Twitter go up and down completely randomly.

Pair Corralation between ATT and Twitter

Taking into account the 90-day investment horizon ATT is expected to generate 16.96 times less return on investment than Twitter. But when comparing it to its historical volatility, ATT Inc is 2.91 times less risky than Twitter. It trades about 0.04 of its potential returns per unit of risk. Twitter is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,152  in Twitter on December 19, 2023 and sell it today you would earn a total of  1,218  from holding Twitter or generate 29.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy6.72%
ValuesDaily Returns

ATT Inc  vs.  Twitter

 Performance 
       Timeline  
ATT Inc 

Risk-Adjusted Performance

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Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Twitter 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Twitter has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Twitter is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

ATT and Twitter Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and Twitter

The main advantage of trading using opposite ATT and Twitter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Twitter 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 Twitter will offset losses from the drop in Twitter's long position.
The idea behind ATT Inc and Twitter 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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