Correlation Between SSE PLC and TELECOM PLUS
Can any of the company-specific risk be diversified away by investing in both SSE PLC and TELECOM PLUS 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 SSE PLC and TELECOM PLUS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SSE PLC ADR and TELECOM PLUS PLC, you can compare the effects of market volatilities on SSE PLC and TELECOM PLUS 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 SSE PLC with a short position of TELECOM PLUS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSE PLC and TELECOM PLUS.
Diversification Opportunities for SSE PLC and TELECOM PLUS
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SSE and TELECOM is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SSE PLC ADR and TELECOM PLUS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM PLUS PLC and SSE PLC 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 SSE PLC ADR are associated (or correlated) with TELECOM PLUS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELECOM PLUS PLC has no effect on the direction of SSE PLC i.e., SSE PLC and TELECOM PLUS go up and down completely randomly.
Pair Corralation between SSE PLC and TELECOM PLUS
Assuming the 90 days trading horizon SSE PLC is expected to generate 8.0 times less return on investment than TELECOM PLUS. But when comparing it to its historical volatility, SSE PLC ADR is 2.01 times less risky than TELECOM PLUS. It trades about 0.0 of its potential returns per unit of risk. TELECOM PLUS PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,024 in TELECOM PLUS PLC on December 11, 2024 and sell it today you would lose (44.00) from holding TELECOM PLUS PLC or give up 2.17% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
SSE PLC ADR vs. TELECOM PLUS PLC
Performance |
Timeline |
SSE PLC ADR |
TELECOM PLUS PLC |
SSE PLC and TELECOM PLUS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SSE PLC and TELECOM PLUS
The main advantage of trading using opposite SSE PLC and TELECOM PLUS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSE PLC position performs unexpectedly, TELECOM PLUS 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 TELECOM PLUS will offset losses from the drop in TELECOM PLUS's long position.SSE PLC vs. Singapore Telecommunications Limited | SSE PLC vs. Comba Telecom Systems | SSE PLC vs. Cairo Communication SpA | SSE PLC vs. COMBA TELECOM SYST |
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Check out your portfolio center.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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