Correlation Between Airtel Africa and Singapore Telecommunicatio

Can any of the company-specific risk be diversified away by investing in both Airtel Africa and Singapore Telecommunicatio 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 Singapore Telecommunicatio 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 Singapore Telecommunications Limited, you can compare the effects of market volatilities on Airtel Africa and Singapore Telecommunicatio 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 Singapore Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airtel Africa and Singapore Telecommunicatio.

Diversification Opportunities for Airtel Africa and Singapore Telecommunicatio

0.62

Correlation Coefficient

Airtel Africa  Singapore Telecommunicatio

Poor diversification

The 3 months correlation between Airtel and Singapore is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Airtel Africa Plc and Singapore Telecommunications L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Telecommunicatio 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 Singapore Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Telecommunicatio has no effect on the direction of Airtel Africa i.e., Airtel Africa and Singapore Telecommunicatio go up and down completely randomly.

Pair Corralation between Airtel Africa and Singapore Telecommunicatio

Assuming the 90 days horizon Airtel Africa Plc is expected to generate 1.77 times more return on investment than Singapore Telecommunicatio. However, Airtel Africa is 1.77 times more volatile than Singapore Telecommunications Limited. It trades about 0.0 of its potential returns per unit of risk. Singapore Telecommunications Limited is currently generating about 0.0 per unit of risk. If you would invest  142.00  in Airtel Africa Plc on September 13, 2024 and sell it today you would lose (7.00) from holding Airtel Africa Plc or give up 4.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Airtel Africa Plc  vs.  Singapore Telecommunications L

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 nearly stable basic indicators, Airtel Africa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Singapore Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Telecommunications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Singapore Telecommunicatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Airtel Africa and Singapore Telecommunicatio

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

The idea behind Airtel Africa Plc and Singapore Telecommunications Limited 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.