Correlation Between DATA Communications and Teleperformance

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

By analyzing existing cross correlation between DATA Communications Management and Teleperformance PK, you can compare the effects of market volatilities on DATA Communications and Teleperformance 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 DATA Communications with a short position of Teleperformance. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATA Communications and Teleperformance.

Diversification Opportunities for DATA Communications and Teleperformance

0.79

Correlation Coefficient

DATA Communications  Teleperformance

Poor diversification

The 3 months correlation between DATA and Teleperformance is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding DATA Communications Management and Teleperformance PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teleperformance PK and DATA Communications 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 DATA Communications Management are associated (or correlated) with Teleperformance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teleperformance PK has no effect on the direction of DATA Communications i.e., DATA Communications and Teleperformance go up and down completely randomly.

Pair Corralation between DATA Communications and Teleperformance

Assuming the 90 days horizon DATA Communications Management is expected to under-perform the Teleperformance. In addition to that, DATA Communications is 1.98 times more volatile than Teleperformance PK. It trades about -0.11 of its total potential returns per unit of risk. Teleperformance PK is currently generating about -0.09 per unit of volatility. If you would invest  5,460  in Teleperformance PK on September 4, 2024 and sell it today you would lose (856.00) from holding Teleperformance PK or give up 15.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

DATA Communications Management  vs.  Teleperformance PK

DATA Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DATA Communications Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Teleperformance PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teleperformance PK 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with DATA Communications and Teleperformance

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

The idea behind DATA Communications Management and Teleperformance PK 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.