Correlation Between American Nortel and Airtel Africa
Can any of the company-specific risk be diversified away by investing in both American Nortel and Airtel Africa 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 American Nortel and Airtel Africa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Nortel Communications and Airtel Africa Plc, you can compare the effects of market volatilities on American Nortel and Airtel Africa 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 American Nortel with a short position of Airtel Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Nortel and Airtel Africa.
Diversification Opportunities for American Nortel and Airtel Africa
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and Airtel is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding American Nortel Communications and Airtel Africa Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airtel Africa Plc and American Nortel 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 American Nortel Communications are associated (or correlated) with Airtel Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airtel Africa Plc has no effect on the direction of American Nortel i.e., American Nortel and Airtel Africa go up and down completely randomly.
Pair Corralation between American Nortel and Airtel Africa
Given the investment horizon of 90 days American Nortel is expected to generate 1.86 times less return on investment than Airtel Africa. But when comparing it to its historical volatility, American Nortel Communications is 1.09 times less risky than Airtel Africa. It trades about 0.02 of its potential returns per unit of risk. Airtel Africa Plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 141.00 in Airtel Africa Plc on October 26, 2024 and sell it today you would earn a total of 9.00 from holding Airtel Africa Plc or generate 6.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.85% |
| Values | Daily Returns |
American Nortel Communications vs. Airtel Africa Plc
Performance |
| Timeline |
| American Nortel Comm |
| Airtel Africa Plc |
American Nortel and Airtel Africa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Nortel and Airtel Africa
The main advantage of trading using opposite American Nortel and Airtel Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Nortel position performs unexpectedly, Airtel Africa 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 Airtel Africa will offset losses from the drop in Airtel Africa's long position.The idea behind American Nortel Communications and Airtel Africa Plc 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.| Airtel Africa vs. BCE Inc | Airtel Africa vs. Axiologix | Airtel Africa vs. Advanced Info Service | Airtel Africa vs. American Nortel Communications |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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