Correlation Between Datatec and MTN
Can any of the company-specific risk be diversified away by investing in both Datatec and MTN 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 Datatec and MTN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Datatec and MTN Group, you can compare the effects of market volatilities on Datatec and MTN 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 Datatec with a short position of MTN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datatec and MTN.
Diversification Opportunities for Datatec and MTN
Excellent diversification
The 3 months correlation between Datatec and MTN is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Datatec and MTN Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group and Datatec 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 Datatec are associated (or correlated) with MTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of Datatec i.e., Datatec and MTN go up and down completely randomly.
Pair Corralation between Datatec and MTN
Assuming the 90 days trading horizon Datatec is expected to generate 1.85 times more return on investment than MTN. However, Datatec is 1.85 times more volatile than MTN Group. It trades about 0.25 of its potential returns per unit of risk. MTN Group is currently generating about 0.07 per unit of risk. If you would invest 388,500 in Datatec on September 14, 2024 and sell it today you would earn a total of 54,900 from holding Datatec or generate 14.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Datatec vs. MTN Group
Performance |
| Timeline |
| Datatec |
| MTN Group |
Datatec and MTN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Datatec and MTN
The main advantage of trading using opposite Datatec and MTN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Datatec position performs unexpectedly, MTN 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 MTN will offset losses from the drop in MTN's long position.| Datatec vs. British American Tobacco | Datatec vs. Glencore PLC | Datatec vs. Anglo American PLC | Datatec vs. ABSA Bank Limited |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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