Correlation Between Telephone and U S Cellular

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

By analyzing existing cross correlation between Telephone and Data and United States Cellular, you can compare the effects of market volatilities on Telephone and U S Cellular 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 Telephone with a short position of U S Cellular. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telephone and U S Cellular.

Diversification Opportunities for Telephone and U S Cellular

-0.24

Correlation Coefficient

Telephone  U S Cellular

Very good diversification

The 3 months correlation between Telephone and USM is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Telephone and Data and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular and Telephone 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 Telephone and Data are associated (or correlated) with U S Cellular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of Telephone i.e., Telephone and U S Cellular go up and down completely randomly.

Pair Corralation between Telephone and U S Cellular

Assuming the 90 days trading horizon Telephone and Data is expected to under-perform the U S Cellular. But the preferred stock apears to be less risky and, when comparing its historical volatility, Telephone and Data is 1.48 times less risky than U S Cellular. The preferred stock trades about -0.01 of its potential returns per unit of risk. The United States Cellular is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,540  in United States Cellular on October 7, 2024 and sell it today you would earn a total of  726.00  from holding United States Cellular or generate 13.1% return on investment over 90 days.

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

Telephone and Data  vs.  United States Cellular

Telephone and Data

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telephone and Data has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Telephone is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

United States Cellular

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, U S Cellular displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telephone and U S Cellular

The main advantage of trading using opposite Telephone and U S Cellular positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telephone position performs unexpectedly, U S Cellular 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 U S Cellular will offset losses from the drop in U S Cellular's long position.

The idea behind Telephone and Data and United States Cellular 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.