Correlation Between G8 Education and TPG Telecom
Can any of the company-specific risk be diversified away by investing in both G8 Education and TPG 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 G8 Education and TPG Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between G8 Education and TPG Telecom, you can compare the effects of market volatilities on G8 Education and TPG 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 G8 Education with a short position of TPG Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 Education and TPG Telecom.
Diversification Opportunities for G8 Education and TPG Telecom
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between GEM and TPG is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding G8 Education and TPG Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Telecom and G8 Education 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 G8 Education are associated (or correlated) with TPG Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG Telecom has no effect on the direction of G8 Education i.e., G8 Education and TPG Telecom go up and down completely randomly.
Pair Corralation between G8 Education and TPG Telecom
Assuming the 90 days trading horizon G8 Education is expected to generate 1.2 times more return on investment than TPG Telecom. However, G8 Education is 1.2 times more volatile than TPG Telecom. It trades about 0.08 of its potential returns per unit of risk. TPG Telecom is currently generating about -0.02 per unit of risk. If you would invest 94.00 in G8 Education on September 1, 2024 and sell it today you would earn a total of 42.00 from holding G8 Education or generate 44.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
G8 Education vs. TPG Telecom
Performance |
| Timeline |
| G8 Education |
| TPG Telecom |
G8 Education and TPG Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with G8 Education and TPG Telecom
The main advantage of trading using opposite G8 Education and TPG Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 Education position performs unexpectedly, TPG 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 TPG Telecom will offset losses from the drop in TPG Telecom's long position.| G8 Education vs. Aneka Tambang Tbk | G8 Education vs. Macquarie Group | G8 Education vs. Macquarie Group Ltd | G8 Education vs. Challenger |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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