Correlation Between Telus Corp and Frontier Communications

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

By analyzing existing cross correlation between Telus Corp and Frontier Communications Parent, you can compare the effects of market volatilities on Telus Corp and Frontier Communications 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 Telus Corp with a short position of Frontier Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telus Corp and Frontier Communications.

Diversification Opportunities for Telus Corp and Frontier Communications

0.57

Correlation Coefficient

Telus Corp  Frontier Communications

Very weak diversification

The 3 months correlation between Telus and Frontier is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Telus Corp and Frontier Communications Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Communications and Telus Corp 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 Telus Corp are associated (or correlated) with Frontier Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Communications has no effect on the direction of Telus Corp i.e., Telus Corp and Frontier Communications go up and down completely randomly.

Pair Corralation between Telus Corp and Frontier Communications

Allowing for the 90-day total investment horizon Telus Corp is expected to generate 6.25 times more return on investment than Frontier Communications. However, Telus Corp is 6.25 times more volatile than Frontier Communications Parent. It trades about 0.08 of its potential returns per unit of risk. Frontier Communications Parent is currently generating about 0.06 per unit of risk. If you would invest  1,363  in Telus Corp on January 16, 2025 and sell it today you would earn a total of  102.00  from holding Telus Corp or generate 7.48% return on investment over 90 days.

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

Telus Corp  vs.  Frontier Communications Parent

Telus Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telus Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Telus Corp may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Frontier Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Communications Parent are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Frontier Communications is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Telus Corp and Frontier Communications

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

The idea behind Telus Corp and Frontier Communications Parent 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.