Correlation Between Telenor ASA and China TowerLimited
Can any of the company-specific risk be diversified away by investing in both Telenor ASA and China TowerLimited 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 Telenor ASA and China TowerLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telenor ASA ADR and China Tower, you can compare the effects of market volatilities on Telenor ASA and China TowerLimited 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 Telenor ASA with a short position of China TowerLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telenor ASA and China TowerLimited.
Diversification Opportunities for Telenor ASA and China TowerLimited
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Telenor and China is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Telenor ASA ADR and China Tower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China TowerLimited and Telenor ASA 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 Telenor ASA ADR are associated (or correlated) with China TowerLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China TowerLimited has no effect on the direction of Telenor ASA i.e., Telenor ASA and China TowerLimited go up and down completely randomly.
Pair Corralation between Telenor ASA and China TowerLimited
Assuming the 90 days horizon Telenor ASA ADR is expected to under-perform the China TowerLimited. But the pink sheet apears to be less risky and, when comparing its historical volatility, Telenor ASA ADR is 1.71 times less risky than China TowerLimited. The pink sheet trades about -0.01 of its potential returns per unit of risk. The China Tower is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telenor ASA ADR vs. China Tower
Performance |
| Timeline |
| Telenor ASA ADR |
| China TowerLimited |
Telenor ASA and China TowerLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telenor ASA and China TowerLimited
The main advantage of trading using opposite Telenor ASA and China TowerLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telenor ASA position performs unexpectedly, China TowerLimited 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 China TowerLimited will offset losses from the drop in China TowerLimited's long position.| Telenor ASA vs. Bank Rakyat | Telenor ASA vs. PT Bank Rakyat | Telenor ASA vs. Samsung Electronics Co | Telenor ASA vs. Bank Mandiri Persero |
| China TowerLimited vs. Singapore Telecommunications Limited | China TowerLimited vs. Vodafone Group PLC | China TowerLimited vs. PT Indosat Tbk | China TowerLimited vs. KDDI Corp |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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