Correlation Between T Mobile and ConocoPhillips

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

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

Diversification Opportunities for T Mobile and ConocoPhillips

0.42

Correlation Coefficient

T Mobile  ConocoPhillips

Very weak diversification

The 3 months correlation between T1MU34 and ConocoPhillips is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and T Mobile 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 T Mobile are associated (or correlated) with ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of T Mobile i.e., T Mobile and ConocoPhillips go up and down completely randomly.

Pair Corralation between T Mobile and ConocoPhillips

Assuming the 90 days trading horizon T Mobile is expected to generate 1.01 times less return on investment than ConocoPhillips. But when comparing it to its historical volatility, T Mobile is 1.13 times less risky than ConocoPhillips. It trades about 0.05 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,927  in ConocoPhillips on October 24, 2024 and sell it today you would earn a total of  223.00  from holding ConocoPhillips or generate 4.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

T Mobile  vs.  ConocoPhillips

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 somewhat strong primary indicators, T Mobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ConocoPhillips

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ConocoPhillips is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with T Mobile and ConocoPhillips

The main advantage of trading using opposite T Mobile and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Mobile position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' long position.

The idea behind T Mobile and ConocoPhillips 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.