Correlation Between TPG Telecom and Iluka Resources

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

By analyzing existing cross correlation between TPG Telecom and Iluka Resources, you can compare the effects of market volatilities on TPG Telecom and Iluka Resources 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 TPG Telecom with a short position of Iluka Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG Telecom and Iluka Resources.

Diversification Opportunities for TPG Telecom and Iluka Resources

0.62

Correlation Coefficient

TPG Telecom  Iluka Resources

Poor diversification

The 3 months correlation between TPG and Iluka is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding TPG Telecom and Iluka Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iluka Resources and TPG Telecom 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 TPG Telecom are associated (or correlated) with Iluka Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iluka Resources has no effect on the direction of TPG Telecom i.e., TPG Telecom and Iluka Resources go up and down completely randomly.

Pair Corralation between TPG Telecom and Iluka Resources

Assuming the 90 days trading horizon TPG Telecom is expected to generate 0.46 times more return on investment than Iluka Resources. However, TPG Telecom is 2.16 times less risky than Iluka Resources. It trades about -0.08 of its potential returns per unit of risk. Iluka Resources is currently generating about -0.14 per unit of risk. If you would invest  451.00  in TPG Telecom on October 26, 2024 and sell it today you would lose (28.00) from holding TPG Telecom or give up 6.21% of portfolio value over 90 days.

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

TPG Telecom  vs.  Iluka Resources

TPG Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

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

Iluka Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iluka Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with TPG Telecom and Iluka Resources

The main advantage of trading using opposite TPG Telecom and Iluka Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG Telecom position performs unexpectedly, Iluka Resources 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 Iluka Resources will offset losses from the drop in Iluka Resources' long position.

The idea behind TPG Telecom and Iluka Resources 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.