Correlation Between Telephone and IHS Holding

Can any of the company-specific risk be diversified away by investing in both Telephone and IHS Holding 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 Telephone and IHS Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Telephone and Data and IHS Holding, you can compare the effects of market volatilities on Telephone and IHS Holding 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 Telephone with a short position of IHS Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telephone and IHS Holding.

Diversification Opportunities for Telephone and IHS Holding

0.34

Correlation Coefficient

Telephone  IHS Holding

Weak diversification

The 3 months correlation between Telephone and IHS is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Telephone and Data and IHS Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHS Holding and Telephone 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 Telephone and Data are associated (or correlated) with IHS Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHS Holding has no effect on the direction of Telephone i.e., Telephone and IHS Holding go up and down completely randomly.

Pair Corralation between Telephone and IHS Holding

Considering the 90-day investment horizon Telephone and Data is expected to generate 1.02 times more return on investment than IHS Holding. However, Telephone is 1.02 times more volatile than IHS Holding. It trades about 0.15 of its potential returns per unit of risk. IHS Holding is currently generating about 0.07 per unit of risk. If you would invest  1,422  in Telephone and Data on February 20, 2024 and sell it today you would earn a total of  658.00  from holding Telephone and Data or generate 46.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Telephone and Data  vs.  IHS Holding

Telephone and Data

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telephone and Data are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Telephone unveiled solid returns over the last few months and may actually be approaching a breakup point.

IHS Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IHS Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical indicators, IHS Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telephone and IHS Holding

The main advantage of trading using opposite Telephone and IHS Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telephone position performs unexpectedly, IHS Holding 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 IHS Holding will offset losses from the drop in IHS Holding's long position.

The idea behind Telephone and Data and IHS Holding 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.