Correlation Between T-Mobile and Telkom SA

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

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

Diversification Opportunities for T-Mobile and Telkom SA

0.71

Correlation Coefficient

T-Mobile  Telkom SA

Poor diversification

The 3 months correlation between T-Mobile and Telkom is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and Telkom SA SOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telkom SA SOC 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 Telkom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telkom SA SOC has no effect on the direction of T-Mobile i.e., T-Mobile and Telkom SA go up and down completely randomly.

Pair Corralation between T-Mobile and Telkom SA

Assuming the 90 days horizon T Mobile is expected to generate 0.77 times more return on investment than Telkom SA. However, T Mobile is 1.3 times less risky than Telkom SA. It trades about 0.1 of its potential returns per unit of risk. Telkom SA SOC is currently generating about 0.04 per unit of risk. If you would invest  21,321  in T Mobile on December 22, 2024 and sell it today you would earn a total of  2,519  from holding T Mobile or generate 11.81% return on investment over 90 days.

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

T Mobile  vs.  Telkom SA SOC

T Mobile

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 7 (%) 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.

Telkom SA SOC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Telkom SA SOC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Telkom SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with T-Mobile and Telkom SA

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

The idea behind T Mobile and Telkom SA SOC 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.