Correlation Between Dollarama and T MOBILE

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

By analyzing existing cross correlation between Dollarama and T MOBILE US, you can compare the effects of market volatilities on Dollarama and T MOBILE 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 Dollarama with a short position of T MOBILE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollarama and T MOBILE.

Diversification Opportunities for Dollarama and T MOBILE

0.85

Correlation Coefficient

Dollarama  T MOBILE

Very poor diversification

The 3 months correlation between Dollarama and TM5 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dollarama and T MOBILE US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T MOBILE US and Dollarama 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 Dollarama are associated (or correlated) with T MOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T MOBILE US has no effect on the direction of Dollarama i.e., Dollarama and T MOBILE go up and down completely randomly.

Pair Corralation between Dollarama and T MOBILE

Assuming the 90 days horizon Dollarama is expected to generate 2.18 times less return on investment than T MOBILE. But when comparing it to its historical volatility, Dollarama is 1.14 times less risky than T MOBILE. It trades about 0.1 of its potential returns per unit of risk. T MOBILE US is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  18,464  in T MOBILE US on September 15, 2024 and sell it today you would earn a total of  3,611  from holding T MOBILE US or generate 19.56% return on investment over 90 days.

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

Dollarama  vs.  T MOBILE US

Dollarama

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dollarama are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Dollarama may actually be approaching a critical reversion point that can send shares even higher in January 2025.

T MOBILE US

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, T MOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dollarama and T MOBILE

The main advantage of trading using opposite Dollarama and T MOBILE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollarama position performs unexpectedly, T MOBILE 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 T MOBILE will offset losses from the drop in T MOBILE's long position.

The idea behind Dollarama and T MOBILE US 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 the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.