Correlation Between K2 Asset and TPG Telecom

Can any of the company-specific risk be diversified away by investing in both K2 Asset 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 K2 Asset and TPG Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K2 Asset Management and TPG Telecom, you can compare the effects of market volatilities on K2 Asset 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 K2 Asset with a short position of TPG Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of K2 Asset and TPG Telecom.

Diversification Opportunities for K2 Asset and TPG Telecom

-0.5

Correlation Coefficient

K2 Asset  TPG Telecom

Very good diversification

The 3 months correlation between KAM and TPG is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding K2 Asset Management and TPG Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Telecom and K2 Asset 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 K2 Asset Management 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 K2 Asset i.e., K2 Asset and TPG Telecom go up and down completely randomly.

Pair Corralation between K2 Asset and TPG Telecom

Assuming the 90 days trading horizon K2 Asset Management is expected to under-perform the TPG Telecom. In addition to that, K2 Asset is 1.11 times more volatile than TPG Telecom. It trades about -0.33 of its total potential returns per unit of risk. TPG Telecom is currently generating about -0.03 per unit of volatility. If you would invest  441.00  in TPG Telecom on October 12, 2024 and sell it today you would lose (3.00) from holding TPG Telecom or give up 0.68% of portfolio value over 90 days.

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

K2 Asset Management  vs.  TPG Telecom

K2 Asset Management

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K2 Asset Management are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, K2 Asset 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 latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with K2 Asset and TPG Telecom

The main advantage of trading using opposite K2 Asset and TPG Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K2 Asset 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 K2 Asset Management 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.