Correlation Between Electrovaya Common and TPG Telecom

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

By analyzing existing cross correlation between Electrovaya Common Shares and TPG Telecom Limited, you can compare the effects of market volatilities on Electrovaya Common and TPG Telecom 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 Electrovaya Common with a short position of TPG Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electrovaya Common and TPG Telecom.

Diversification Opportunities for Electrovaya Common and TPG Telecom

0.08

Correlation Coefficient

Electrovaya Common  TPG Telecom

Significant diversification

The 3 months correlation between Electrovaya and TPG is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Electrovaya Common Shares and TPG Telecom Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Telecom Limited and Electrovaya Common 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 Electrovaya Common Shares are associated (or correlated) with TPG Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG Telecom Limited has no effect on the direction of Electrovaya Common i.e., Electrovaya Common and TPG Telecom go up and down completely randomly.

Pair Corralation between Electrovaya Common and TPG Telecom

Given the investment horizon of 90 days Electrovaya Common Shares is expected to generate 18.4 times more return on investment than TPG Telecom. However, Electrovaya Common is 18.4 times more volatile than TPG Telecom Limited. It trades about 0.08 of its potential returns per unit of risk. TPG Telecom Limited is currently generating about 0.13 per unit of risk. If you would invest  217.00  in Electrovaya Common Shares on September 12, 2024 and sell it today you would earn a total of  36.00  from holding Electrovaya Common Shares or generate 16.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Electrovaya Common Shares  vs.  TPG Telecom Limited

Electrovaya Common Shares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electrovaya Common Shares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Electrovaya Common sustained solid returns over the last few months and may actually be approaching a breakup point.

TPG Telecom Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TPG Telecom Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, TPG Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Electrovaya Common and TPG Telecom

The main advantage of trading using opposite Electrovaya Common and TPG Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electrovaya Common position performs unexpectedly, TPG Telecom 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 TPG Telecom will offset losses from the drop in TPG Telecom's long position.

The idea behind Electrovaya Common Shares and TPG Telecom Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.