Correlation Between TPG Telecom and Native Mineral

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

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

Diversification Opportunities for TPG Telecom and Native Mineral

0.44

Correlation Coefficient

TPG Telecom  Native Mineral

Very weak diversification

The 3 months correlation between TPG and Native is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding TPG Telecom and Native Mineral Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Native Mineral 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 Native Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Native Mineral Resources has no effect on the direction of TPG Telecom i.e., TPG Telecom and Native Mineral go up and down completely randomly.

Pair Corralation between TPG Telecom and Native Mineral

Assuming the 90 days trading horizon TPG Telecom is expected to generate 6.89 times less return on investment than Native Mineral. But when comparing it to its historical volatility, TPG Telecom is 4.33 times less risky than Native Mineral. It trades about 0.12 of its potential returns per unit of risk. Native Mineral Resources is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Native Mineral Resources on December 21, 2024 and sell it today you would earn a total of  3.70  from holding Native Mineral Resources or generate 92.5% return on investment over 90 days.

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

TPG Telecom  vs.  Native Mineral Resources

TPG Telecom

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TPG Telecom are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, TPG Telecom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Native Mineral Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Native Mineral Resources are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Native Mineral unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TPG Telecom and Native Mineral

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

The idea behind TPG Telecom and Native Mineral 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.