Correlation Between TPG Telecom and Woolworths
Can any of the company-specific risk be diversified away by investing in both TPG Telecom and Woolworths 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 Woolworths into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TPG Telecom and Woolworths, you can compare the effects of market volatilities on TPG Telecom and Woolworths 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 Woolworths. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG Telecom and Woolworths.
Diversification Opportunities for TPG Telecom and Woolworths
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TPG and Woolworths is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding TPG Telecom and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths 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 Woolworths. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths has no effect on the direction of TPG Telecom i.e., TPG Telecom and Woolworths go up and down completely randomly.
Pair Corralation between TPG Telecom and Woolworths
Assuming the 90 days trading horizon TPG Telecom is expected to generate 1.6 times more return on investment than Woolworths. However, TPG Telecom is 1.6 times more volatile than Woolworths. It trades about 0.01 of its potential returns per unit of risk. Woolworths is currently generating about -0.03 per unit of risk. If you would invest 439.00 in TPG Telecom on October 16, 2024 and sell it today you would lose (1.00) from holding TPG Telecom or give up 0.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TPG Telecom vs. Woolworths
Performance |
| Timeline |
| TPG Telecom |
| Woolworths |
TPG Telecom and Woolworths Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TPG Telecom and Woolworths
The main advantage of trading using opposite TPG Telecom and Woolworths positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG Telecom position performs unexpectedly, Woolworths 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 Woolworths will offset losses from the drop in Woolworths' long position.| TPG Telecom vs. IDP Education | TPG Telecom vs. Djerriwarrh Investments | TPG Telecom vs. Diversified United Investment | TPG Telecom vs. Pinnacle Investment Management |
| Woolworths vs. Neurotech International | Woolworths vs. The Environmental Group | Woolworths vs. Mach7 Technologies | Woolworths vs. Vulcan Steel |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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