Correlation Between Telenor ASA and Vodafone Group
Can any of the company-specific risk be diversified away by investing in both Telenor ASA and Vodafone 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 Telenor ASA and Vodafone Group 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 Vodafone Group PLC, you can compare the effects of market volatilities on Telenor ASA and Vodafone 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 Telenor ASA with a short position of Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telenor ASA and Vodafone Group.
Diversification Opportunities for Telenor ASA and Vodafone Group
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telenor and Vodafone is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Telenor ASA ADR and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of Telenor ASA i.e., Telenor ASA and Vodafone Group go up and down completely randomly.
Pair Corralation between Telenor ASA and Vodafone Group
Assuming the 90 days horizon Telenor ASA ADR is expected to generate 0.8 times more return on investment than Vodafone Group. However, Telenor ASA ADR is 1.25 times less risky than Vodafone Group. It trades about -0.01 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about -0.09 per unit of risk. If you would invest 1,186 in Telenor ASA ADR on August 30, 2024 and sell it today you would lose (9.00) from holding Telenor ASA ADR or give up 0.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telenor ASA ADR vs. Vodafone Group PLC
Performance |
| Timeline |
| Telenor ASA ADR |
| Vodafone Group PLC |
Telenor ASA and Vodafone Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telenor ASA and Vodafone Group
The main advantage of trading using opposite Telenor ASA and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telenor ASA position performs unexpectedly, Vodafone 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 Vodafone Group will offset losses from the drop in Vodafone Group'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 |
| Vodafone Group vs. KDDI Corp | Vodafone Group vs. Amrica Mvil, SAB | Vodafone Group vs. Airtel Africa Plc | Vodafone Group vs. BCE Inc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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