Correlation Between Finexia Financial and TPG Telecom

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

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

Diversification Opportunities for Finexia Financial and TPG Telecom

-0.09

Correlation Coefficient

Finexia Financial  TPG Telecom

Good diversification

The 3 months correlation between Finexia and TPG is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Finexia Financial Group and TPG Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Telecom and Finexia Financial 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 Finexia Financial Group 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 has no effect on the direction of Finexia Financial i.e., Finexia Financial and TPG Telecom go up and down completely randomly.

Pair Corralation between Finexia Financial and TPG Telecom

Assuming the 90 days trading horizon Finexia Financial Group is expected to generate 2.17 times more return on investment than TPG Telecom. However, Finexia Financial is 2.17 times more volatile than TPG Telecom. It trades about 0.08 of its potential returns per unit of risk. TPG Telecom is currently generating about -0.05 per unit of risk. If you would invest  28.00  in Finexia Financial Group on October 25, 2024 and sell it today you would earn a total of  1.00  from holding Finexia Financial Group or generate 3.57% return on investment over 90 days.

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

Finexia Financial Group  vs.  TPG Telecom

Finexia Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Finexia Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Finexia Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

TPG Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPG Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, TPG Telecom 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 Finexia Financial and TPG Telecom

The main advantage of trading using opposite Finexia Financial and TPG Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Finexia Financial 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 Finexia Financial Group and TPG Telecom 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.