Correlation Between Airtel Africa and U S Cellular

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

Diversification Opportunities for Airtel Africa and U S Cellular

-0.36

Correlation Coefficient

Airtel Africa  U S Cellular

Very good diversification

The 3 months correlation between Airtel and USM is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Airtel Africa Plc and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular 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 U S Cellular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of Airtel Africa i.e., Airtel Africa and U S Cellular go up and down completely randomly.

Pair Corralation between Airtel Africa and U S Cellular

Assuming the 90 days horizon Airtel Africa is expected to generate 3.87 times less return on investment than U S Cellular. But when comparing it to its historical volatility, Airtel Africa Plc is 1.41 times less risky than U S Cellular. It trades about 0.02 of its potential returns per unit of risk. United States Cellular is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,306  in United States Cellular on October 11, 2024 and sell it today you would earn a total of  3,799  from holding United States Cellular or generate 164.74% return on investment over 90 days.

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

Airtel Africa Plc  vs.  United States Cellular

Airtel Africa Plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Airtel Africa Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Airtel Africa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

United States Cellular

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, U S Cellular may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Airtel Africa and U S Cellular

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

The idea behind Airtel Africa Plc and United States Cellular 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.