Correlation Between TelstraLimited and MTN Group
Can any of the company-specific risk be diversified away by investing in both TelstraLimited 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 TelstraLimited and MTN Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telstra Limited and MTN Group Ltd, you can compare the effects of market volatilities on TelstraLimited 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 TelstraLimited with a short position of MTN Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of TelstraLimited and MTN Group.
Diversification Opportunities for TelstraLimited and MTN Group
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between TelstraLimited and MTN is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Telstra Limited and MTN Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group and TelstraLimited 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 Telstra Limited 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 TelstraLimited i.e., TelstraLimited and MTN Group go up and down completely randomly.
Pair Corralation between TelstraLimited and MTN Group
Assuming the 90 days horizon Telstra Limited is expected to generate 1.35 times more return on investment than MTN Group. However, TelstraLimited is 1.35 times more volatile than MTN Group Ltd. It trades about 0.0 of its potential returns per unit of risk. MTN Group Ltd is currently generating about -0.25 per unit of risk. 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 | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Telstra Limited vs. MTN Group Ltd
Performance |
| Timeline |
| Telstra Limited |
| MTN Group |
TelstraLimited and MTN Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TelstraLimited and MTN Group
The main advantage of trading using opposite TelstraLimited and MTN Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TelstraLimited 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.| TelstraLimited vs. Proximus NV ADR | TelstraLimited vs. Singapore Telecommunications Limited | TelstraLimited vs. MTN Group Ltd | TelstraLimited vs. Tele2 AB |
| 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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