Correlation Between Phillips and T Mobile

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

By analyzing existing cross correlation between Phillips 66 and T Mobile, you can compare the effects of market volatilities on Phillips 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 Phillips with a short position of T Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phillips and T Mobile.

Diversification Opportunities for Phillips and T Mobile

0.39

Correlation Coefficient

Phillips  T Mobile

Weak diversification

The 3 months correlation between Phillips and T1MU34 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile and Phillips 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 Phillips 66 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 Phillips i.e., Phillips and T Mobile go up and down completely randomly.

Pair Corralation between Phillips and T Mobile

Assuming the 90 days trading horizon Phillips 66 is expected to under-perform the T Mobile. But the stock apears to be less risky and, when comparing its historical volatility, Phillips 66 is 1.56 times less risky than T Mobile. The stock trades about -0.53 of its potential returns per unit of risk. The T Mobile is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  73,965  in T Mobile on October 4, 2024 and sell it today you would lose (5,710) from holding T Mobile or give up 7.72% of portfolio value over 90 days.

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

Phillips 66  vs.  T Mobile

Phillips 66

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phillips 66 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

T Mobile

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, T Mobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phillips and T Mobile

The main advantage of trading using opposite Phillips and T Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phillips 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 Phillips 66 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.