Correlation Between Frontier Communications and T Mobile

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

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

Diversification Opportunities for Frontier Communications and T Mobile

0.69

Correlation Coefficient

Frontier Communications  T Mobile

Poor diversification

The 3 months correlation between Frontier and TMUS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Communications Parent and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile and Frontier Communications 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 Frontier Communications Parent 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 has no effect on the direction of Frontier Communications i.e., Frontier Communications and T Mobile go up and down completely randomly.

Pair Corralation between Frontier Communications and T Mobile

Given the investment horizon of 90 days Frontier Communications is expected to generate 5.67 times less return on investment than T Mobile. But when comparing it to its historical volatility, Frontier Communications Parent is 6.61 times less risky than T Mobile. It trades about 0.22 of its potential returns per unit of risk. T Mobile is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  21,992  in T Mobile on December 29, 2024 and sell it today you would earn a total of  4,501  from holding T Mobile or generate 20.47% return on investment over 90 days.

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

Frontier Communications Parent  vs.  T Mobile

Frontier Communications

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Communications Parent are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Frontier Communications is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

T Mobile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile 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 Frontier Communications and T Mobile

The main advantage of trading using opposite Frontier Communications and T Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Communications 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 Frontier Communications Parent and T Mobile 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.