Correlation Between GMO Internet and T Mobile

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

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

Diversification Opportunities for GMO Internet and T Mobile

0.55

Correlation Coefficient

GMO Internet  T Mobile

Very weak diversification

The 3 months correlation between GMO and TM5 is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile and GMO Internet 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 GMO Internet 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 GMO Internet i.e., GMO Internet and T Mobile go up and down completely randomly.

Pair Corralation between GMO Internet and T Mobile

Assuming the 90 days horizon GMO Internet is expected to generate 6.04 times more return on investment than T Mobile. However, GMO Internet is 6.04 times more volatile than T Mobile. It trades about 0.1 of its potential returns per unit of risk. T Mobile is currently generating about 0.15 per unit of risk. If you would invest  685.00  in GMO Internet on September 29, 2024 and sell it today you would earn a total of  925.00  from holding GMO Internet or generate 135.04% return on investment over 90 days.

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

GMO Internet  vs.  T Mobile

GMO Internet

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

T Mobile

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, T Mobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMO Internet and T Mobile

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