Correlation Between Safety Insurance and T MOBILE

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

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

Diversification Opportunities for Safety Insurance and T MOBILE

0.84

Correlation Coefficient

Safety Insurance  T MOBILE

Very poor diversification

The 3 months correlation between Safety and TM5 is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group 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 Safety Insurance 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 Safety Insurance Group 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 Safety Insurance i.e., Safety Insurance and T MOBILE go up and down completely randomly.

Pair Corralation between Safety Insurance and T MOBILE

Assuming the 90 days horizon Safety Insurance is expected to generate 1.69 times less return on investment than T MOBILE. But when comparing it to its historical volatility, Safety Insurance Group is 1.03 times less risky than T MOBILE. It trades about 0.1 of its potential returns per unit of risk. T MOBILE US is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  18,137  in T MOBILE US on September 21, 2024 and sell it today you would earn a total of  3,118  from holding T MOBILE US or generate 17.19% return on investment over 90 days.

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

Safety Insurance Group  vs.  T MOBILE US

Safety Insurance

Risk-Adjusted Performance

7 of 100

OK

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

T MOBILE US

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 12 (%) 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 Safety Insurance and T MOBILE

The main advantage of trading using opposite Safety Insurance and T MOBILE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance 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 Safety Insurance Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.