Correlation Between ATT and Exxon

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

Diversification Opportunities for ATT and Exxon

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between ATT and Exxon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of ATT i.e., ATT and Exxon go up and down completely randomly.

Pair Corralation between ATT and Exxon

Taking into account the 90-day investment horizon ATT is expected to generate 13.44 times less return on investment than Exxon. But when comparing it to its historical volatility, ATT Inc is 1.1 times less risky than Exxon. It trades about 0.0 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,049  in Exxon Mobil Corp on January 20, 2024 and sell it today you would earn a total of  3,803  from holding Exxon Mobil Corp or generate 47.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  Exxon Mobil Corp

 Performance 
       Timeline  
ATT Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Exxon Mobil Corp 

Risk-Adjusted Performance

26 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Exxon displayed solid returns over the last few months and may actually be approaching a breakup point.

ATT and Exxon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and Exxon

The main advantage of trading using opposite ATT and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.
The idea behind ATT Inc and Exxon Mobil Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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