Correlation Between T-MOBILE and Adidas AG

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

By analyzing existing cross correlation between T MOBILE INCDL 00001 and adidas AG, you can compare the effects of market volatilities on T-MOBILE and Adidas AG 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 Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of T-MOBILE and Adidas AG.

Diversification Opportunities for T-MOBILE and Adidas AG

0.1

Correlation Coefficient

T-MOBILE  Adidas AG

Average diversification

The 3 months correlation between T-MOBILE and Adidas is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding T MOBILE INCDL 00001 and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 INCDL 00001 are associated (or correlated) with Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of T-MOBILE i.e., T-MOBILE and Adidas AG go up and down completely randomly.

Pair Corralation between T-MOBILE and Adidas AG

Assuming the 90 days trading horizon T MOBILE INCDL 00001 is expected to generate 1.43 times more return on investment than Adidas AG. However, T-MOBILE is 1.43 times more volatile than adidas AG. It trades about 0.1 of its potential returns per unit of risk. adidas AG is currently generating about -0.05 per unit of risk. If you would invest  21,172  in T MOBILE INCDL 00001 on December 21, 2024 and sell it today you would earn a total of  2,498  from holding T MOBILE INCDL 00001 or generate 11.8% return on investment over 90 days.

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

T MOBILE INCDL 00001  vs.  adidas AG

T MOBILE INCDL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE INCDL 00001 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, T-MOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

adidas AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days adidas AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adidas AG is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with T-MOBILE and Adidas AG

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

The idea behind T MOBILE INCDL 00001 and adidas AG 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.