Correlation Between International Business and ATT

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

Diversification Opportunities for International Business and ATT

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between International and ATT is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and International Business 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 International Business Machines 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 International Business i.e., International Business and ATT go up and down completely randomly.

Pair Corralation between International Business and ATT

Considering the 90-day investment horizon International Business Machines is expected to generate 0.75 times more return on investment than ATT. However, International Business Machines is 1.33 times less risky than ATT. It trades about -0.03 of its potential returns per unit of risk. ATT Inc is currently generating about -0.24 per unit of risk. If you would invest  13,547  in International Business Machines on May 14, 2022 and sell it today you would lose (146.00)  from holding International Business Machines or give up 1.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

International Business Machine  vs.  ATT Inc

 Performance (%) 
       Timeline  
International Business 
International Performance
0 of 100
Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady fundamental drivers, International Business is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

International 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 latest sluggish performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ATT Price Channel

International Business and ATT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and ATT

The main advantage of trading using opposite International Business and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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