Correlation Between Snap and TPG Telecom
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and TPG Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and TPG Telecom, you can compare the effects of market volatilities on Snap 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 Snap with a short position of TPG Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and TPG Telecom.
Diversification Opportunities for Snap and TPG Telecom
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Snap and TPG is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and TPG Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Telecom and Snap 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 Snap Inc 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 Snap i.e., Snap and TPG Telecom go up and down completely randomly.
Pair Corralation between Snap and TPG Telecom
Given the investment horizon of 90 days Snap Inc is expected to generate 2.42 times more return on investment than TPG Telecom. However, Snap is 2.42 times more volatile than TPG Telecom. It trades about 0.03 of its potential returns per unit of risk. TPG Telecom is currently generating about -0.01 per unit of risk. If you would invest 1,004 in Snap Inc on August 31, 2024 and sell it today you would earn a total of 177.00 from holding Snap Inc or generate 17.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.94% |
| Values | Daily Returns |
Snap Inc vs. TPG Telecom
Performance |
| Timeline |
| Snap Inc |
| TPG Telecom |
Snap and TPG Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and TPG Telecom
The main advantage of trading using opposite Snap and TPG Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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.The idea behind Snap Inc and TPG Telecom 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.| TPG Telecom vs. Aneka Tambang Tbk | TPG Telecom vs. Woolworths | TPG Telecom vs. Commonwealth Bank | TPG 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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