Correlation Between TPG Telecom and Spirit Telecom

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

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

Diversification Opportunities for TPG Telecom and Spirit Telecom

-0.01

Correlation Coefficient

TPG Telecom  Spirit Telecom

Good diversification

The 3 months correlation between TPG and Spirit is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding TPG Telecom and Spirit Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Telecom 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 Spirit Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Telecom has no effect on the direction of TPG Telecom i.e., TPG Telecom and Spirit Telecom go up and down completely randomly.

Pair Corralation between TPG Telecom and Spirit Telecom

Assuming the 90 days trading horizon TPG Telecom is expected to generate 7.24 times less return on investment than Spirit Telecom. But when comparing it to its historical volatility, TPG Telecom is 3.01 times less risky than Spirit Telecom. It trades about 0.01 of its potential returns per unit of risk. Spirit Telecom is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Spirit Telecom on October 24, 2024 and sell it today you would lose (9.00) from holding Spirit Telecom or give up 14.06% of portfolio value over 90 days.

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

TPG Telecom  vs.  Spirit Telecom

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.

Spirit Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with TPG Telecom and Spirit Telecom

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

The idea behind TPG Telecom and Spirit Telecom 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.