Correlation Between TFS FINANCIAL and T-MOBILE

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

By analyzing existing cross correlation between TFS FINANCIAL and T MOBILE US, you can compare the effects of market volatilities on TFS FINANCIAL and T-MOBILE 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 TFS FINANCIAL with a short position of T-MOBILE. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFS FINANCIAL and T-MOBILE.

Diversification Opportunities for TFS FINANCIAL and T-MOBILE

0.85

Correlation Coefficient

TFS FINANCIAL  T-MOBILE

Very poor diversification

The 3 months correlation between TFS and T-MOBILE is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and T MOBILE US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T MOBILE US and TFS FINANCIAL 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 TFS FINANCIAL are associated (or correlated) with T-MOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T MOBILE US has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and T-MOBILE go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and T-MOBILE

Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 2.32 times less return on investment than T-MOBILE. In addition to that, TFS FINANCIAL is 1.33 times more volatile than T MOBILE US. It trades about 0.1 of its total potential returns per unit of risk. T MOBILE US is currently generating about 0.3 per unit of volatility. If you would invest  17,842  in T MOBILE US on September 2, 2024 and sell it today you would earn a total of  5,648  from holding T MOBILE US or generate 31.66% return on investment over 90 days.

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

TFS FINANCIAL  vs.  T MOBILE US

TFS FINANCIAL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, TFS FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

T MOBILE US

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, T-MOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TFS FINANCIAL and T-MOBILE

The main advantage of trading using opposite TFS FINANCIAL and T-MOBILE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL position performs unexpectedly, T-MOBILE 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 T-MOBILE will offset losses from the drop in T-MOBILE's long position.

The idea behind TFS FINANCIAL and T MOBILE US 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.