Correlation Between T MOBILE and RTL Group

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

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

Diversification Opportunities for T MOBILE and RTL Group

-0.84

Correlation Coefficient

T MOBILE  RTL Group

Pay attention - limited upside

The 3 months correlation between TM5 and RTL is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding T MOBILE US and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 US are associated (or correlated) with RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of T MOBILE i.e., T MOBILE and RTL Group go up and down completely randomly.

Pair Corralation between T MOBILE and RTL Group

Assuming the 90 days trading horizon T MOBILE US is expected to generate 0.78 times more return on investment than RTL Group. However, T MOBILE US is 1.27 times less risky than RTL Group. It trades about 0.19 of its potential returns per unit of risk. RTL Group SA is currently generating about -0.03 per unit of risk. If you would invest  16,353  in T MOBILE US on September 13, 2024 and sell it today you would earn a total of  5,987  from holding T MOBILE US or generate 36.61% return on investment over 90 days.

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

T MOBILE US  vs.  RTL Group SA

T MOBILE US

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, T MOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

RTL Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTL Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with T MOBILE and RTL Group

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

The idea behind T MOBILE US and RTL Group SA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.