Correlation Between EP Financial and Spirit Telecom
Can any of the company-specific risk be diversified away by investing in both EP Financial and Spirit Telecom 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 EP Financial and Spirit Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EP Financial Group and Spirit Telecom, you can compare the effects of market volatilities on EP Financial and Spirit Telecom 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 EP Financial with a short position of Spirit Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of EP Financial and Spirit Telecom.
Diversification Opportunities for EP Financial and Spirit Telecom
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between EP1 and Spirit is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Spirit Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Telecom and EP Financial 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 EP Financial Group are associated (or correlated) with Spirit Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Telecom has no effect on the direction of EP Financial i.e., EP Financial and Spirit Telecom go up and down completely randomly.
Pair Corralation between EP Financial and Spirit Telecom
Assuming the 90 days trading horizon EP Financial is expected to generate 2.28 times less return on investment than Spirit Telecom. But when comparing it to its historical volatility, EP Financial Group is 1.46 times less risky than Spirit Telecom. It trades about 0.03 of its potential returns per unit of risk. Spirit Telecom is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3.70 in Spirit Telecom on August 31, 2024 and sell it today you would earn a total of 2.50 from holding Spirit Telecom or generate 67.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EP Financial Group vs. Spirit Telecom
Performance |
| Timeline |
| EP Financial Group |
| Spirit Telecom |
EP Financial and Spirit Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EP Financial and Spirit Telecom
The main advantage of trading using opposite EP Financial and Spirit Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EP Financial position performs unexpectedly, Spirit Telecom 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 Spirit Telecom will offset losses from the drop in Spirit Telecom's long position.| EP Financial vs. Energy Resources | EP Financial vs. 88 Energy | EP Financial vs. Amani Gold | EP Financial vs. A1 Investments Resources |
| Spirit Telecom vs. Aneka Tambang Tbk | Spirit Telecom vs. Woolworths | Spirit Telecom vs. Commonwealth Bank | Spirit Telecom vs. BHP Group Limited |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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