Correlation Between PCCW and Airtel Africa
Can any of the company-specific risk be diversified away by investing in both PCCW 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 PCCW and Airtel Africa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PCCW Limited and Airtel Africa Plc, you can compare the effects of market volatilities on PCCW 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 PCCW with a short position of Airtel Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of PCCW and Airtel Africa.
Diversification Opportunities for PCCW and Airtel Africa
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between PCCW and Airtel is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding PCCW Limited 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 PCCW 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 PCCW Limited 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 PCCW i.e., PCCW and Airtel Africa go up and down completely randomly.
Pair Corralation between PCCW and Airtel Africa
Assuming the 90 days horizon PCCW is expected to generate 1.12 times less return on investment than Airtel Africa. But when comparing it to its historical volatility, PCCW Limited is 1.51 times less risky than Airtel Africa. It trades about 0.06 of its potential returns per unit of risk. Airtel Africa Plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 143.00 in Airtel Africa Plc on October 26, 2024 and sell it today you would earn a total of 7.00 from holding Airtel Africa Plc or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PCCW Limited vs. Airtel Africa Plc
Performance |
| Timeline |
| PCCW Limited |
| Airtel Africa Plc |
PCCW and Airtel Africa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PCCW and Airtel Africa
The main advantage of trading using opposite PCCW and Airtel Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PCCW 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.| PCCW vs. PCCW Limited | PCCW vs. New World Development | PCCW vs. Guangdong Investment | PCCW vs. Bank of East |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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