Correlation Between Disney and ATT
Can any of the company-specific risk be diversified away by investing in both Disney 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 Disney and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and ATT Inc, you can compare the effects of market volatilities on Disney 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 Disney with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and ATT.
Diversification Opportunities for Disney and ATT
Weak diversification
The 3 months correlation between Disney and ATT is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Disney 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 Walt Disney 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 Disney i.e., Disney and ATT go up and down completely randomly.
Pair Corralation between Disney and ATT
Considering the 90-day investment horizon Walt Disney is expected to generate 1.23 times more return on investment than ATT. However, Disney is 1.23 times more volatile than ATT Inc. It trades about 0.19 of its potential returns per unit of risk. ATT Inc is currently generating about 0.13 per unit of risk. If you would invest 8,140 in Walt Disney on December 29, 2023 and sell it today you would earn a total of 3,958 from holding Walt Disney or generate 48.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Walt Disney vs. ATT Inc
Performance |
Timeline |
Walt Disney |
ATT Inc |
Disney and ATT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Disney and ATT
The main advantage of trading using opposite Disney and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney 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.ATT vs. Robix Environmental Technologies | ATT vs. Quanex Building Products | ATT vs. IPG Photonics | ATT vs. BK Technologies |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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