Correlation Between U S Cellular and Telenor ASA

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

By analyzing existing cross correlation between United States Cellular and Telenor ASA, you can compare the effects of market volatilities on U S Cellular and Telenor ASA 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 U S Cellular with a short position of Telenor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of U S Cellular and Telenor ASA.

Diversification Opportunities for U S Cellular and Telenor ASA

-0.59

Correlation Coefficient

U S Cellular  Telenor ASA

Excellent diversification

The 3 months correlation between USM and Telenor is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding United States Cellular and Telenor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA and U S Cellular 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 United States Cellular are associated (or correlated) with Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA has no effect on the direction of U S Cellular i.e., U S Cellular and Telenor ASA go up and down completely randomly.

Pair Corralation between U S Cellular and Telenor ASA

Considering the 90-day investment horizon United States Cellular is expected to generate 1.27 times more return on investment than Telenor ASA. However, U S Cellular is 1.27 times more volatile than Telenor ASA. It trades about 0.09 of its potential returns per unit of risk. Telenor ASA is currently generating about -0.02 per unit of risk. If you would invest  5,590  in United States Cellular on September 5, 2024 and sell it today you would earn a total of  741.00  from holding United States Cellular or generate 13.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

United States Cellular  vs.  Telenor ASA

United States Cellular

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, U S Cellular displayed solid returns over the last few months and may actually be approaching a breakup point.

Telenor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with U S Cellular and Telenor ASA

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

The idea behind United States Cellular and Telenor ASA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.