Correlation Between China TowerLimited and Vodafone Group
Can any of the company-specific risk be diversified away by investing in both China TowerLimited and Vodafone 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 China TowerLimited and Vodafone Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Tower and Vodafone Group PLC, you can compare the effects of market volatilities on China TowerLimited and Vodafone 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 China TowerLimited with a short position of Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of China TowerLimited and Vodafone Group.
Diversification Opportunities for China TowerLimited and Vodafone Group
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Vodafone is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding China Tower and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC and China TowerLimited 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 China Tower are associated (or correlated) with Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of China TowerLimited i.e., China TowerLimited and Vodafone Group go up and down completely randomly.
Pair Corralation between China TowerLimited and Vodafone Group
Assuming the 90 days horizon China Tower is expected to generate 1.37 times more return on investment than Vodafone Group. However, China TowerLimited is 1.37 times more volatile than Vodafone Group PLC. It trades about 0.02 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about -0.09 per unit of risk. If you would invest 13.00 in China Tower on August 30, 2024 and sell it today you would earn a total of 0.00 from holding China Tower or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Tower vs. Vodafone Group PLC
Performance |
| Timeline |
| China TowerLimited |
| Vodafone Group PLC |
China TowerLimited and Vodafone Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China TowerLimited and Vodafone Group
The main advantage of trading using opposite China TowerLimited and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China TowerLimited position performs unexpectedly, Vodafone 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 Vodafone Group will offset losses from the drop in Vodafone Group's long position.| China TowerLimited vs. Singapore Telecommunications Limited | China TowerLimited vs. Vodafone Group PLC | China TowerLimited vs. PT Indosat Tbk | China TowerLimited vs. KDDI Corp |
| Vodafone Group vs. KDDI Corp | Vodafone Group vs. Amrica Mvil, SAB | Vodafone Group vs. Airtel Africa Plc | Vodafone Group vs. BCE Inc |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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