Correlation Between MTN Group and TelstraLimited
Can any of the company-specific risk be diversified away by investing in both MTN Group and TelstraLimited 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 MTN Group and TelstraLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTN Group Ltd and Telstra Limited, you can compare the effects of market volatilities on MTN Group and TelstraLimited 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 MTN Group with a short position of TelstraLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN Group and TelstraLimited.
Diversification Opportunities for MTN Group and TelstraLimited
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MTN and TelstraLimited is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group Ltd and Telstra Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telstra Limited and MTN Group 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 MTN Group Ltd are associated (or correlated) with TelstraLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telstra Limited has no effect on the direction of MTN Group i.e., MTN Group and TelstraLimited go up and down completely randomly.
Pair Corralation between MTN Group and TelstraLimited
Assuming the 90 days horizon MTN Group Ltd is expected to under-perform the TelstraLimited. But the pink sheet apears to be less risky and, when comparing its historical volatility, MTN Group Ltd is 1.32 times less risky than TelstraLimited. The pink sheet trades about -0.26 of its potential returns per unit of risk. The Telstra Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 240.00 in Telstra Limited on August 29, 2024 and sell it today you would lose (2.00) from holding Telstra Limited or give up 0.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTN Group Ltd vs. Telstra Limited
Performance |
| Timeline |
| MTN Group |
| Telstra Limited |
MTN Group and TelstraLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTN Group and TelstraLimited
The main advantage of trading using opposite MTN Group and TelstraLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTN Group position performs unexpectedly, TelstraLimited 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 TelstraLimited will offset losses from the drop in TelstraLimited's long position.| MTN Group vs. KDDI Corp | MTN Group vs. Amrica Mvil, SAB | MTN Group vs. ATT Inc | MTN Group vs. FingerMotion |
| TelstraLimited vs. KDDI Corp | TelstraLimited vs. Amrica Mvil, SAB | TelstraLimited vs. ATT Inc | TelstraLimited vs. FingerMotion |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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