Correlation Between ATT and General Electric

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

Diversification Opportunities for ATT and General Electric

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between ATT and General is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric and ATT 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 ATT Inc are associated (or correlated) with General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of ATT i.e., ATT and General Electric go up and down completely randomly.

Pair Corralation between ATT and General Electric

Taking into account the 90-day investment horizon ATT Inc is expected to under-perform the General Electric. In addition to that, ATT is 1.12 times more volatile than General Electric. It trades about -0.23 of its total potential returns per unit of risk. General Electric is currently generating about 0.59 per unit of volatility. If you would invest  6,368  in General Electric on May 19, 2022 and sell it today you would earn a total of  1,624  from holding General Electric or generate 25.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  General Electric

 Performance (%) 
       Timeline  
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 weak 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

General Electric 
General Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, General Electric may actually be approaching a critical reversion point that can send shares even higher in September 2022.

General Price Channel

ATT and General Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and General Electric

The main advantage of trading using opposite ATT and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, General Electric 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 General Electric will offset losses from the drop in General Electric's long position.
The idea behind ATT Inc and General Electric 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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