Correlation Between TPG Telecom and Liontown Resources

Can any of the company-specific risk be diversified away by investing in both TPG Telecom and Liontown 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 Liontown 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 Liontown Resources, you can compare the effects of market volatilities on TPG Telecom and Liontown 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 Liontown Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG Telecom and Liontown Resources.

Diversification Opportunities for TPG Telecom and Liontown Resources

0.12

Correlation Coefficient

TPG Telecom  Liontown Resources

Average diversification

The 3 months correlation between TPG and Liontown is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding TPG Telecom and Liontown Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontown 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 Liontown Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liontown Resources has no effect on the direction of TPG Telecom i.e., TPG Telecom and Liontown Resources go up and down completely randomly.

Pair Corralation between TPG Telecom and Liontown Resources

Assuming the 90 days trading horizon TPG Telecom is expected to generate 0.41 times more return on investment than Liontown Resources. However, TPG Telecom is 2.45 times less risky than Liontown Resources. It trades about -0.06 of its potential returns per unit of risk. Liontown Resources is currently generating about -0.63 per unit of risk. If you would invest  450.00  in TPG Telecom on September 19, 2024 and sell it today you would lose (7.00) from holding TPG Telecom or give up 1.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

TPG Telecom  vs.  Liontown 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 latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Liontown Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liontown Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with TPG Telecom and Liontown Resources

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

The idea behind TPG Telecom and Liontown 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.