Correlation Between T Mobile and CME

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

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

Diversification Opportunities for T Mobile and CME

0.82

Correlation Coefficient

T Mobile  CME

Very poor diversification

The 3 months correlation between TM5 and CME is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group and T Mobile 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 T Mobile are associated (or correlated) with CME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CME Group has no effect on the direction of T Mobile i.e., T Mobile and CME go up and down completely randomly.

Pair Corralation between T Mobile and CME

Assuming the 90 days horizon T Mobile is expected to generate 1.25 times more return on investment than CME. However, T Mobile is 1.25 times more volatile than CME Group. It trades about 0.16 of its potential returns per unit of risk. CME Group is currently generating about 0.2 per unit of risk. If you would invest  18,259  in T Mobile on September 27, 2024 and sell it today you would earn a total of  3,131  from holding T Mobile or generate 17.15% return on investment over 90 days.

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

T Mobile  vs.  CME Group

T Mobile

Risk-Adjusted Performance

12 of 100

Good

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

CME Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CME reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T Mobile and CME

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

The idea behind T Mobile and CME Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.