Correlation Between AeroVironment and T-Mobile

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

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

Diversification Opportunities for AeroVironment and T-Mobile

-0.18

Correlation Coefficient

AeroVironment  T-Mobile

Good diversification

The 3 months correlation between AeroVironment and T-Mobile is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding AeroVironment and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile and AeroVironment 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 AeroVironment 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 AeroVironment i.e., AeroVironment and T-Mobile go up and down completely randomly.

Pair Corralation between AeroVironment and T-Mobile

Assuming the 90 days horizon AeroVironment is expected to under-perform the T-Mobile. In addition to that, AeroVironment is 2.22 times more volatile than T Mobile. It trades about -0.07 of its total potential returns per unit of risk. T Mobile is currently generating about 0.05 per unit of volatility. If you would invest  19,400  in T Mobile on October 11, 2024 and sell it today you would earn a total of  905.00  from holding T Mobile or generate 4.66% return on investment over 90 days.

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

AeroVironment  vs.  T Mobile

AeroVironment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AeroVironment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

T Mobile

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, T-Mobile is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AeroVironment and T-Mobile

The main advantage of trading using opposite AeroVironment and T-Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AeroVironment 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 AeroVironment 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.