Correlation Between AIRTEL AFRICA and SOVEREIGN TRUST

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Can any of the company-specific risk be diversified away by investing in both AIRTEL AFRICA and SOVEREIGN TRUST 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 SOVEREIGN TRUST 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 SOVEREIGN TRUST INSURANCE, you can compare the effects of market volatilities on AIRTEL AFRICA and SOVEREIGN TRUST 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 SOVEREIGN TRUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIRTEL AFRICA and SOVEREIGN TRUST.

Diversification Opportunities for AIRTEL AFRICA and SOVEREIGN TRUST

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between AIRTEL and SOVEREIGN is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding AIRTEL AFRICA PLC and SOVEREIGN TRUST INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOVEREIGN TRUST INSURANCE 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 SOVEREIGN TRUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOVEREIGN TRUST INSURANCE has no effect on the direction of AIRTEL AFRICA i.e., AIRTEL AFRICA and SOVEREIGN TRUST go up and down completely randomly.

Pair Corralation between AIRTEL AFRICA and SOVEREIGN TRUST

If you would invest  64.00  in SOVEREIGN TRUST INSURANCE on September 12, 2024 and sell it today you would earn a total of  22.00  from holding SOVEREIGN TRUST INSURANCE or generate 34.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

AIRTEL AFRICA PLC  vs.  SOVEREIGN TRUST INSURANCE

 Performance 
       Timeline  
AIRTEL AFRICA PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AIRTEL AFRICA PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AIRTEL AFRICA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
SOVEREIGN TRUST INSURANCE 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in SOVEREIGN TRUST INSURANCE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, SOVEREIGN TRUST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

AIRTEL AFRICA and SOVEREIGN TRUST Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AIRTEL AFRICA and SOVEREIGN TRUST

The main advantage of trading using opposite AIRTEL AFRICA and SOVEREIGN TRUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIRTEL AFRICA position performs unexpectedly, SOVEREIGN TRUST 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 SOVEREIGN TRUST will offset losses from the drop in SOVEREIGN TRUST's long position.
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The idea behind AIRTEL AFRICA PLC and SOVEREIGN TRUST INSURANCE 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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