Correlation Between Vodacom Group and Vodafone Group
Can any of the company-specific risk be diversified away by investing in both Vodacom Group 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 Vodacom Group and Vodafone Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vodacom Group Ltd and Vodafone Group PLC, you can compare the effects of market volatilities on Vodacom Group 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 Vodacom Group with a short position of Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodacom Group and Vodafone Group.
Diversification Opportunities for Vodacom Group and Vodafone Group
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vodacom and Vodafone is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vodacom Group Ltd 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 Vodacom Group 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 Vodacom Group Ltd 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 Vodacom Group i.e., Vodacom Group and Vodafone Group go up and down completely randomly.
Pair Corralation between Vodacom Group and Vodafone Group
Assuming the 90 days horizon Vodacom Group is expected to generate 1.39 times less return on investment than Vodafone Group. But when comparing it to its historical volatility, Vodacom Group Ltd is 1.44 times less risky than Vodafone Group. It trades about 0.04 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 78.00 in Vodafone Group PLC on August 29, 2024 and sell it today you would earn a total of 10.00 from holding Vodafone Group PLC or generate 12.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 84.69% |
| Values | Daily Returns |
Vodacom Group Ltd vs. Vodafone Group PLC
Performance |
| Timeline |
| Vodacom Group |
| Vodafone Group PLC |
Vodacom Group and Vodafone Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vodacom Group and Vodafone Group
The main advantage of trading using opposite Vodacom Group and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodacom Group 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.| Vodacom Group vs. XL Axiata Tbk | Vodacom Group vs. Telenor ASA ADR | Vodacom Group vs. Tele2 AB | Vodacom Group vs. MTN Group Ltd |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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