Correlation Between ATT and United Parcel

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

Diversification Opportunities for ATT and United Parcel

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between ATT and United is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of ATT i.e., ATT and United Parcel go up and down completely randomly.

Pair Corralation between ATT and United Parcel

Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.46 times more return on investment than United Parcel. However, ATT Inc is 2.19 times less risky than United Parcel. It trades about 0.21 of its potential returns per unit of risk. United Parcel Service is currently generating about 0.0 per unit of risk. If you would invest  1,683  in ATT Inc on December 29, 2023 and sell it today you would earn a total of  72.00  from holding ATT Inc or generate 4.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  United Parcel Service

 Performance 
       Timeline  
ATT Inc 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in April 2024.
United Parcel Service 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, United Parcel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ATT and United Parcel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and United Parcel

The main advantage of trading using opposite ATT and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.
The idea behind ATT Inc and United Parcel Service 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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