Correlation Between Cairo Communication and Vodafone Group

Can any of the company-specific risk be diversified away by investing in both Cairo Communication 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 Cairo Communication and Vodafone Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cairo Communication SpA and Vodafone Group PLC, you can compare the effects of market volatilities on Cairo Communication 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 Cairo Communication with a short position of Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairo Communication and Vodafone Group.

Diversification Opportunities for Cairo Communication and Vodafone Group

0.79

Correlation Coefficient

Cairo Communication  Vodafone Group

Poor diversification

The 3 months correlation between Cairo and Vodafone is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Communication SpA 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 Cairo Communication 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 Cairo Communication SpA 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 Cairo Communication i.e., Cairo Communication and Vodafone Group go up and down completely randomly.

Pair Corralation between Cairo Communication and Vodafone Group

Assuming the 90 days trading horizon Cairo Communication SpA is expected to generate 0.82 times more return on investment than Vodafone Group. However, Cairo Communication SpA is 1.22 times less risky than Vodafone Group. It trades about 0.21 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about 0.15 per unit of risk. If you would invest  248.00  in Cairo Communication SpA on December 24, 2024 and sell it today you would earn a total of  44.00  from holding Cairo Communication SpA or generate 17.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Cairo Communication SpA  vs.  Vodafone Group PLC

Cairo Communication SpA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cairo Communication SpA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cairo Communication unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vodafone Group PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Group PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vodafone Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cairo Communication and Vodafone Group

The main advantage of trading using opposite Cairo Communication and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairo Communication 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.

The idea behind Cairo Communication SpA and Vodafone Group PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.