Correlation Between Best Buy and ATT

Can any of the company-specific risk be diversified away by investing in both Best Buy 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 Best Buy and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Best Buy Co and ATT Inc, you can compare the effects of market volatilities on Best Buy 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 Best Buy with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and ATT.

Diversification Opportunities for Best Buy and ATT

0.11

Correlation Coefficient

Best Buy  ATT

Average diversification

The 3 months correlation between Best and ATT is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Best Buy 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 Best Buy Co 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 Best Buy i.e., Best Buy and ATT go up and down completely randomly.

Pair Corralation between Best Buy and ATT

Considering the 90-day investment horizon Best Buy Co is expected to under-perform the ATT. In addition to that, Best Buy is 1.42 times more volatile than ATT Inc. It trades about -0.28 of its total potential returns per unit of risk. ATT Inc is currently generating about -0.14 per unit of volatility. If you would invest  1,727  in ATT Inc on January 27, 2024 and sell it today you would lose (52.00) from holding ATT Inc or give up 3.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Best Buy Co  vs.  ATT Inc

Best Buy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Best Buy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

ATT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ATT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Best Buy and ATT

The main advantage of trading using opposite Best Buy and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy 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 Best Buy Co 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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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.