Correlation Between Western Asset and ATT
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset E and ATT Inc, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and ATT.
Diversification Opportunities for Western Asset and ATT
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and ATT is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset E and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Western Asset 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 Western Asset E 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 Western Asset i.e., Western Asset and ATT go up and down completely randomly.
Pair Corralation between Western Asset and ATT
Assuming the 90 days horizon Western Asset is expected to generate 5.2 times less return on investment than ATT. But when comparing it to its historical volatility, Western Asset E is 3.11 times less risky than ATT. It trades about 0.08 of its potential returns per unit of risk. ATT Inc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,726 in ATT Inc on March 12, 2024 and sell it today you would earn a total of 60.00 from holding ATT Inc or generate 3.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Western Asset E vs. ATT Inc
Performance |
Timeline |
Western Asset E |
ATT Inc |
Western Asset and ATT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Western Asset and ATT
The main advantage of trading using opposite Western Asset and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.Western Asset vs. Vanguard Total Bond | Western Asset vs. Vanguard Total Bond | Western Asset vs. Vanguard Total Bond | Western Asset vs. Vanguard Total Bond |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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