Correlation Between Australian Strategic and TPG Telecom

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

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

Diversification Opportunities for Australian Strategic and TPG Telecom

0.66

Correlation Coefficient

Australian Strategic  TPG Telecom

Poor diversification

The 3 months correlation between Australian and TPG is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and TPG Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Telecom and Australian Strategic 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 Australian Strategic Materials are associated (or correlated) with TPG Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG Telecom has no effect on the direction of Australian Strategic i.e., Australian Strategic and TPG Telecom go up and down completely randomly.

Pair Corralation between Australian Strategic and TPG Telecom

Assuming the 90 days trading horizon Australian Strategic Materials is expected to under-perform the TPG Telecom. In addition to that, Australian Strategic is 3.49 times more volatile than TPG Telecom. It trades about -0.03 of its total potential returns per unit of risk. TPG Telecom is currently generating about -0.09 per unit of volatility. If you would invest  483.00  in TPG Telecom on September 17, 2024 and sell it today you would lose (37.00) from holding TPG Telecom or give up 7.66% of portfolio value over 90 days.

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

Australian Strategic Materials  vs.  TPG Telecom

Australian Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Australian Strategic and TPG Telecom

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

The idea behind Australian Strategic Materials and TPG 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.