Correlation Between T-Mobile and Chongqing Machinery

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

By analyzing existing cross correlation between T Mobile and Chongqing Machinery Electric, you can compare the effects of market volatilities on T-Mobile and Chongqing Machinery 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 Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of T-Mobile and Chongqing Machinery.

Diversification Opportunities for T-Mobile and Chongqing Machinery

0.25

Correlation Coefficient

T-Mobile  Chongqing Machinery

Modest diversification

The 3 months correlation between T-Mobile and Chongqing is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery 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 Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of T-Mobile i.e., T-Mobile and Chongqing Machinery go up and down completely randomly.

Pair Corralation between T-Mobile and Chongqing Machinery

Assuming the 90 days horizon T Mobile is expected to generate 0.79 times more return on investment than Chongqing Machinery. However, T Mobile is 1.27 times less risky than Chongqing Machinery. It trades about -0.03 of its potential returns per unit of risk. Chongqing Machinery Electric is currently generating about -0.09 per unit of risk. If you would invest  21,870  in T Mobile on October 9, 2024 and sell it today you would lose (395.00) from holding T Mobile or give up 1.81% of portfolio value over 90 days.

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

T Mobile  vs.  Chongqing Machinery Electric

T Mobile

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, T-Mobile may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chongqing Machinery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chongqing Machinery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T-Mobile and Chongqing Machinery

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

The idea behind T Mobile and Chongqing Machinery Electric 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.