Correlation Between Airtel Africa and Vodacom Group
Can any of the company-specific risk be diversified away by investing in both Airtel Africa and Vodacom Group 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 Airtel Africa and Vodacom Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Airtel Africa Plc and Vodacom Group Ltd, you can compare the effects of market volatilities on Airtel Africa and Vodacom Group 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 Airtel Africa with a short position of Vodacom Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airtel Africa and Vodacom Group.
Diversification Opportunities for Airtel Africa and Vodacom Group
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Airtel and Vodacom is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Airtel Africa Plc and Vodacom Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodacom Group and Airtel Africa 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 Airtel Africa Plc are associated (or correlated) with Vodacom Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodacom Group has no effect on the direction of Airtel Africa i.e., Airtel Africa and Vodacom Group go up and down completely randomly.
Pair Corralation between Airtel Africa and Vodacom Group
Assuming the 90 days horizon Airtel Africa Plc is expected to generate 2.67 times more return on investment than Vodacom Group. However, Airtel Africa is 2.67 times more volatile than Vodacom Group Ltd. It trades about 0.04 of its potential returns per unit of risk. Vodacom Group Ltd is currently generating about -0.05 per unit of risk. If you would invest 143.00 in Airtel Africa Plc on October 26, 2024 and sell it today you would earn a total of 7.00 from holding Airtel Africa Plc or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Airtel Africa Plc vs. Vodacom Group Ltd
Performance |
| Timeline |
| Airtel Africa Plc |
| Vodacom Group |
Airtel Africa and Vodacom Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Airtel Africa and Vodacom Group
The main advantage of trading using opposite Airtel Africa and Vodacom Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airtel Africa position performs unexpectedly, Vodacom Group 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 Vodacom Group will offset losses from the drop in Vodacom Group's long position.| Airtel Africa vs. BCE Inc | Airtel Africa vs. Axiologix | Airtel Africa vs. Advanced Info Service | Airtel Africa vs. American Nortel Communications |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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