Correlation Between GrafTech International and TELECOM PLUS

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

By analyzing existing cross correlation between GrafTech International and TELECOM PLUS PLC, you can compare the effects of market volatilities on GrafTech International and TELECOM PLUS 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 GrafTech International with a short position of TELECOM PLUS. Check out your portfolio center. Please also check ongoing floating volatility patterns of GrafTech International and TELECOM PLUS.

Diversification Opportunities for GrafTech International and TELECOM PLUS

-0.33

Correlation Coefficient

GrafTech International  TELECOM PLUS

Very good diversification

The 3 months correlation between GrafTech and TELECOM is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding GrafTech International and TELECOM PLUS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM PLUS PLC and GrafTech International 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 GrafTech International are associated (or correlated) with TELECOM PLUS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELECOM PLUS PLC has no effect on the direction of GrafTech International i.e., GrafTech International and TELECOM PLUS go up and down completely randomly.

Pair Corralation between GrafTech International and TELECOM PLUS

Assuming the 90 days horizon GrafTech International is expected to generate 2.9 times more return on investment than TELECOM PLUS. However, GrafTech International is 2.9 times more volatile than TELECOM PLUS PLC. It trades about 0.16 of its potential returns per unit of risk. TELECOM PLUS PLC is currently generating about -0.02 per unit of risk. If you would invest  88.00  in GrafTech International on September 23, 2024 and sell it today you would earn a total of  67.00  from holding GrafTech International or generate 76.14% return on investment over 90 days.

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

GrafTech International  vs.  TELECOM PLUS PLC

GrafTech International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GrafTech International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GrafTech International reported solid returns over the last few months and may actually be approaching a breakup point.

TELECOM PLUS PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELECOM PLUS PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TELECOM PLUS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GrafTech International and TELECOM PLUS

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

The idea behind GrafTech International and TELECOM PLUS PLC 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.