Correlation Between T Mobile and PACCAR

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

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

Diversification Opportunities for T Mobile and PACCAR

0.95

Correlation Coefficient

T Mobile  PACCAR

Almost no diversification

The 3 months correlation between TM5 and PACCAR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of T Mobile i.e., T Mobile and PACCAR go up and down completely randomly.

Pair Corralation between T Mobile and PACCAR

Assuming the 90 days horizon T Mobile is expected to generate 1.22 times less return on investment than PACCAR. But when comparing it to its historical volatility, T Mobile is 1.17 times less risky than PACCAR. It trades about 0.07 of its potential returns per unit of risk. PACCAR Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,734  in PACCAR Inc on September 27, 2024 and sell it today you would earn a total of  4,306  from holding PACCAR Inc or generate 75.1% return on investment over 90 days.

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

T Mobile  vs.  PACCAR Inc

T Mobile

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, T Mobile reported solid returns over the last few months and may actually be approaching a breakup point.

PACCAR Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T Mobile and PACCAR

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

The idea behind T Mobile and PACCAR Inc 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.