Correlation Between SPDR SP and ATT

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

By analyzing existing cross correlation between SPDR SP Retail and ATT Inc, you can compare the effects of market volatilities on SPDR SP and ATT 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 SPDR SP with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and ATT.

Diversification Opportunities for SPDR SP and ATT

0.23

Correlation Coefficient

SPDR SP  ATT

Modest diversification

The 3 months correlation between SPDR and ATT is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Retail and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and SPDR SP 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 SPDR SP Retail are associated (or correlated) with ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of SPDR SP i.e., SPDR SP and ATT go up and down completely randomly.

Pair Corralation between SPDR SP and ATT

Considering the 90-day investment horizon SPDR SP Retail is expected to generate 0.88 times more return on investment than ATT. However, SPDR SP Retail is 1.14 times less risky than ATT. It trades about 0.07 of its potential returns per unit of risk. ATT Inc is currently generating about 0.03 per unit of risk. If you would invest  5,841  in SPDR SP Retail on January 19, 2024 and sell it today you would earn a total of  1,228  from holding SPDR SP Retail or generate 21.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.56%
Values	Daily Returns

SPDR SP Retail  vs.  ATT Inc

SPDR SP Retail

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Retail are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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

Pair Trading with SPDR SP and ATT

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

The idea behind SPDR SP Retail and ATT Inc 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 Global Correlations module to find global opportunities by holding instruments from different markets.