Correlation Between Telefonica and MTN Group
Can any of the company-specific risk be diversified away by investing in both Telefonica and MTN 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 Telefonica and MTN Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonica SA ADR and MTN Group Ltd, you can compare the effects of market volatilities on Telefonica and MTN 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 Telefonica with a short position of MTN Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and MTN Group.
Diversification Opportunities for Telefonica and MTN Group
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Telefonica and MTN is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and MTN Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group and Telefonica 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 Telefonica SA ADR are associated (or correlated) with MTN Group. 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 Telefonica i.e., Telefonica and MTN Group go up and down completely randomly.
Pair Corralation between Telefonica and MTN Group
Considering the 90-day investment horizon Telefonica is expected to generate 2.73 times less return on investment than MTN Group. But when comparing it to its historical volatility, Telefonica SA ADR is 2.6 times less risky than MTN Group. It trades about 0.05 of its potential returns per unit of risk. MTN Group Ltd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 482.00 in MTN Group Ltd on November 3, 2024 and sell it today you would earn a total of 135.00 from holding MTN Group Ltd or generate 28.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Telefonica SA ADR vs. MTN Group Ltd
Performance |
| Timeline |
| Telefonica SA ADR |
| MTN Group |
Telefonica and MTN Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonica and MTN Group
The main advantage of trading using opposite Telefonica and MTN Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica position performs unexpectedly, MTN 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 MTN Group will offset losses from the drop in MTN Group's long position.| Telefonica vs. SK Telecom Co | Telefonica vs. America Movil SAB | Telefonica vs. KT Corporation | Telefonica vs. Telefonica Brasil SA |
| MTN Group vs. XL Axiata Tbk | MTN Group vs. Telenor ASA ADR | MTN Group vs. KT Corporation | MTN Group vs. Vodacom Group Ltd |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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