Correlation Between Airtel Africa and Telia Company

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

Diversification Opportunities for Airtel Africa and Telia Company

-0.69

Correlation Coefficient

Airtel Africa  Telia Company

Excellent diversification

The 3 months correlation between Airtel and Telia is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Airtel Africa Plc and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company 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 Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Airtel Africa i.e., Airtel Africa and Telia Company go up and down completely randomly.

Pair Corralation between Airtel Africa and Telia Company

Assuming the 90 days horizon Airtel Africa is expected to generate 1.83 times less return on investment than Telia Company. In addition to that, Airtel Africa is 1.07 times more volatile than Telia Company AB. It trades about 0.02 of its total potential returns per unit of risk. Telia Company AB is currently generating about 0.03 per unit of volatility. If you would invest  257.00  in Telia Company AB on October 5, 2024 and sell it today you would earn a total of  53.00  from holding Telia Company AB or generate 20.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.53%
Values	Daily Returns

Airtel Africa Plc  vs.  Telia Company AB

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.

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Airtel Africa and Telia Company

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

The idea behind Airtel Africa Plc and Telia Company AB 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.