Correlation Between TPG Telecom and Wesfarmers
Can any of the company-specific risk be diversified away by investing in both TPG Telecom and Wesfarmers 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 TPG Telecom and Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TPG Telecom and Wesfarmers, you can compare the effects of market volatilities on TPG Telecom and Wesfarmers 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 TPG Telecom with a short position of Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG Telecom and Wesfarmers.
Diversification Opportunities for TPG Telecom and Wesfarmers
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TPG and Wesfarmers is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding TPG Telecom and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers and TPG Telecom 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 TPG Telecom are associated (or correlated) with Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers has no effect on the direction of TPG Telecom i.e., TPG Telecom and Wesfarmers go up and down completely randomly.
Pair Corralation between TPG Telecom and Wesfarmers
Assuming the 90 days trading horizon TPG Telecom is expected to generate 7.3 times less return on investment than Wesfarmers. In addition to that, TPG Telecom is 1.41 times more volatile than Wesfarmers. It trades about 0.01 of its total potential returns per unit of risk. Wesfarmers is currently generating about 0.09 per unit of volatility. If you would invest 4,559 in Wesfarmers on October 7, 2024 and sell it today you would earn a total of 2,622 from holding Wesfarmers or generate 57.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TPG Telecom vs. Wesfarmers
Performance |
| Timeline |
| TPG Telecom |
| Wesfarmers |
TPG Telecom and Wesfarmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TPG Telecom and Wesfarmers
The main advantage of trading using opposite TPG Telecom and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG Telecom position performs unexpectedly, Wesfarmers 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 Wesfarmers will offset losses from the drop in Wesfarmers' long position.| TPG Telecom vs. Aneka Tambang Tbk | TPG Telecom vs. Macquarie Group Ltd | TPG Telecom vs. BHP Group Limited | TPG Telecom vs. Block Inc |
| Wesfarmers vs. Ras Technology Holdings | Wesfarmers vs. Zoom2u Technologies | Wesfarmers vs. Ambertech | Wesfarmers vs. Queste Communications |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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