Correlation Between Telstra and Energy Resources
Can any of the company-specific risk be diversified away by investing in both Telstra and Energy Resources 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 Telstra and Energy Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telstra and Energy Resources, you can compare the effects of market volatilities on Telstra and Energy Resources 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 Telstra with a short position of Energy Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telstra and Energy Resources.
Diversification Opportunities for Telstra and Energy Resources
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Telstra and Energy is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Telstra and Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Resources and Telstra 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 Telstra are associated (or correlated) with Energy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Resources has no effect on the direction of Telstra i.e., Telstra and Energy Resources go up and down completely randomly.
Pair Corralation between Telstra and Energy Resources
Assuming the 90 days trading horizon Telstra is expected to generate 13.93 times less return on investment than Energy Resources. But when comparing it to its historical volatility, Telstra is 16.17 times less risky than Energy Resources. It trades about 0.02 of its potential returns per unit of risk. Energy Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 6.80 in Energy Resources on October 18, 2024 and sell it today you would lose (6.50) from holding Energy Resources or give up 95.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Telstra vs. Energy Resources
Performance |
| Timeline |
| Telstra |
| Energy Resources |
Telstra and Energy Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telstra and Energy Resources
The main advantage of trading using opposite Telstra and Energy Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telstra position performs unexpectedly, Energy Resources 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 Energy Resources will offset losses from the drop in Energy Resources' long position.| Telstra vs. Ainsworth Game Technology | Telstra vs. Super Retail Group | Telstra vs. Sandon Capital Investments | Telstra vs. Qbe Insurance Group |
| Energy Resources vs. Viva Leisure | Energy Resources vs. Dalaroo Metals | Energy Resources vs. Centrex Metals | Energy Resources vs. Aristocrat Leisure |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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