Correlation Between Vodafone Group and American Nortel
Can any of the company-specific risk be diversified away by investing in both Vodafone Group and American Nortel 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 Vodafone Group and American Nortel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vodafone Group PLC and American Nortel Communications, you can compare the effects of market volatilities on Vodafone Group and American Nortel 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 Vodafone Group with a short position of American Nortel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodafone Group and American Nortel.
Diversification Opportunities for Vodafone Group and American Nortel
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Vodafone and American is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and American Nortel Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Nortel Comm and Vodafone 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 Vodafone Group PLC are associated (or correlated) with American Nortel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Nortel Comm has no effect on the direction of Vodafone Group i.e., Vodafone Group and American Nortel go up and down completely randomly.
Pair Corralation between Vodafone Group and American Nortel
Assuming the 90 days horizon Vodafone Group PLC is expected to under-perform the American Nortel. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vodafone Group PLC is 2.1 times less risky than American Nortel. The pink sheet trades about -0.23 of its potential returns per unit of risk. The American Nortel Communications is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2.69 in American Nortel Communications on August 25, 2024 and sell it today you would lose (0.02) from holding American Nortel Communications or give up 0.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vodafone Group PLC vs. American Nortel Communications
Performance |
| Timeline |
| Vodafone Group PLC |
| American Nortel Comm |
Vodafone Group and American Nortel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vodafone Group and American Nortel
The main advantage of trading using opposite Vodafone Group and American Nortel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group position performs unexpectedly, American Nortel 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 American Nortel will offset losses from the drop in American Nortel's long position.| 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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