Correlation Between Big 5 and ATT

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Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and ATT Inc, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and ATT.

Diversification Opportunities for Big 5 and ATT

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between Big 5 and ATT is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and ATT go up and down completely randomly.

Pair Corralation between Big 5 and ATT

Given the investment horizon of 90 days Big 5 Sporting is expected to under-perform the ATT. In addition to that, Big 5 is 2.58 times more volatile than ATT Inc. It trades about -0.06 of its total potential returns per unit of risk. ATT Inc is currently generating about -0.05 per unit of volatility. If you would invest  1,852  in ATT Inc on June 27, 2022 and sell it today you would lose (251.00)  from holding ATT Inc or give up 13.55% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Big 5 Sporting  vs.  ATT Inc

 Performance (%) 
       Timeline  
Big 5 Sporting 
Big 5 Performance
0 of 100
Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Big 5 is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Big 5 Price Channel

ATT Inc 
ATT Performance
0 of 100
Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in October 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ATT Price Channel

Big 5 and ATT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Big 5 and ATT

The main advantage of trading using opposite Big 5 and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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.
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The idea behind Big 5 Sporting 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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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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