Correlation Between Sui and TEL

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

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

Diversification Opportunities for Sui and TEL

0.7

Correlation Coefficient

Sui  TEL

Poor diversification

The 3 months correlation between Sui and TEL is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sui and TEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TEL and Sui 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 Sui are associated (or correlated) with TEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TEL has no effect on the direction of Sui i.e., Sui and TEL go up and down completely randomly.

Pair Corralation between Sui and TEL

Assuming the 90 days trading horizon Sui is expected to generate 1.15 times less return on investment than TEL. But when comparing it to its historical volatility, Sui is 1.48 times less risky than TEL. It trades about 0.37 of its potential returns per unit of risk. TEL is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  0.14  in TEL on September 3, 2024 and sell it today you would earn a total of  0.54  from holding TEL or generate 377.27% return on investment over 90 days.

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

Sui  vs.  TEL

Sui

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sui are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Sui exhibited solid returns over the last few months and may actually be approaching a breakup point.

TEL

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TEL are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, TEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sui and TEL

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

The idea behind Sui and TEL 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.