Correlation Between T Mobile and Capri Holdings

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

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

Diversification Opportunities for T Mobile and Capri Holdings

-0.38

Correlation Coefficient

T Mobile  Capri Holdings

Very good diversification

The 3 months correlation between TM5 and Capri is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and Capri Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings 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 Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of T Mobile i.e., T Mobile and Capri Holdings go up and down completely randomly.

Pair Corralation between T Mobile and Capri Holdings

Assuming the 90 days horizon T Mobile is expected to generate 28.02 times less return on investment than Capri Holdings. But when comparing it to its historical volatility, T Mobile is 2.29 times less risky than Capri Holdings. It trades about 0.01 of its potential returns per unit of risk. Capri Holdings Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,988  in Capri Holdings Limited on October 26, 2024 and sell it today you would earn a total of  354.00  from holding Capri Holdings Limited or generate 17.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

T Mobile  vs.  Capri Holdings Limited

T Mobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, T Mobile is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Capri Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capri Holdings Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Capri Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T Mobile and Capri Holdings

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

The idea behind T Mobile and Capri Holdings Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.