Correlation Between Airtel Africa and KDDI Corp

Can any of the company-specific risk be diversified away by investing in both Airtel Africa and KDDI Corp 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 Airtel Africa and KDDI Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Airtel Africa Plc and KDDI Corp, you can compare the effects of market volatilities on Airtel Africa and KDDI Corp 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 Airtel Africa with a short position of KDDI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airtel Africa and KDDI Corp.

Diversification Opportunities for Airtel Africa and KDDI Corp

0.25

Correlation Coefficient

Airtel Africa  KDDI Corp

Modest diversification

The 3 months correlation between Airtel and KDDI is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Airtel Africa Plc and KDDI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KDDI Corp and Airtel Africa 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 Airtel Africa Plc are associated (or correlated) with KDDI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KDDI Corp has no effect on the direction of Airtel Africa i.e., Airtel Africa and KDDI Corp go up and down completely randomly.

Pair Corralation between Airtel Africa and KDDI Corp

Assuming the 90 days horizon Airtel Africa is expected to generate 2.41 times less return on investment than KDDI Corp. In addition to that, Airtel Africa is 1.05 times more volatile than KDDI Corp. It trades about 0.02 of its total potential returns per unit of risk. KDDI Corp is currently generating about 0.04 per unit of volatility. If you would invest  2,664  in KDDI Corp on October 5, 2024 and sell it today you would earn a total of  776.00  from holding KDDI Corp or generate 29.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.25%
Values	Daily Returns

Airtel Africa Plc  vs.  KDDI Corp

Airtel Africa Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Airtel Africa Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

KDDI Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KDDI Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, KDDI Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Airtel Africa and KDDI Corp

The main advantage of trading using opposite Airtel Africa and KDDI Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airtel Africa position performs unexpectedly, KDDI Corp 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 KDDI Corp will offset losses from the drop in KDDI Corp's long position.

The idea behind Airtel Africa Plc and KDDI Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.