Correlation Between T Mobile and ATT
Can any of the company-specific risk be diversified away by investing in both T Mobile 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 T Mobile and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between T Mobile and ATT Inc, you can compare the effects of market volatilities on T Mobile 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 T Mobile with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Mobile and ATT.
Diversification Opportunities for T Mobile and ATT
Good diversification
The 3 months correlation between TMUS and ATT is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and T Mobile 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 T Mobile 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 T Mobile i.e., T Mobile and ATT go up and down completely randomly.
Pair Corralation between T Mobile and ATT
Given the investment horizon of 90 days T Mobile is expected to under-perform the ATT. But the stock apears to be less risky and, when comparing its historical volatility, T Mobile is 2.06 times less risky than ATT. The stock trades about -0.07 of its potential returns per unit of risk. The ATT Inc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,640 in ATT Inc on January 19, 2024 and sell it today you would lose (28.00) from holding ATT Inc or give up 1.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
T Mobile vs. ATT Inc
Performance |
| Timeline |
| T Mobile |
| ATT Inc |
T Mobile and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with T Mobile and ATT
The main advantage of trading using opposite T Mobile and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Mobile 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 T Mobile 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.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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