Correlation Between Proximus and TelstraLimited
Can any of the company-specific risk be diversified away by investing in both Proximus and TelstraLimited 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 Proximus and TelstraLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Proximus NV ADR and Telstra Limited, you can compare the effects of market volatilities on Proximus and TelstraLimited 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 Proximus with a short position of TelstraLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proximus and TelstraLimited.
Diversification Opportunities for Proximus and TelstraLimited
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Proximus and TelstraLimited is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Proximus NV ADR and Telstra Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telstra Limited and Proximus 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 Proximus NV ADR are associated (or correlated) with TelstraLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telstra Limited has no effect on the direction of Proximus i.e., Proximus and TelstraLimited go up and down completely randomly.
Pair Corralation between Proximus and TelstraLimited
Assuming the 90 days horizon Proximus NV ADR is expected to under-perform the TelstraLimited. In addition to that, Proximus is 1.06 times more volatile than Telstra Limited. It trades about -0.17 of its total potential returns per unit of risk. Telstra Limited is currently generating about 0.0 per unit of volatility. If you would invest 240.00 in Telstra Limited on August 29, 2024 and sell it today you would lose (2.00) from holding Telstra Limited or give up 0.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Proximus NV ADR vs. Telstra Limited
Performance |
| Timeline |
| Proximus NV ADR |
| Telstra Limited |
Proximus and TelstraLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proximus and TelstraLimited
The main advantage of trading using opposite Proximus and TelstraLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proximus position performs unexpectedly, TelstraLimited 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 TelstraLimited will offset losses from the drop in TelstraLimited's long position.| Proximus vs. Singapore Telecommunications Limited | Proximus vs. Telstra Limited | Proximus vs. MTN Group Ltd | Proximus vs. Tele2 AB |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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