Correlation Between American Nortel and Axiata Group

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

By analyzing existing cross correlation between American Nortel Communications and Axiata Group Berhad, you can compare the effects of market volatilities on American Nortel and Axiata 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 American Nortel with a short position of Axiata Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Nortel and Axiata Group.

Diversification Opportunities for American Nortel and Axiata Group

0.24

Correlation Coefficient

American Nortel  Axiata Group

Modest diversification

The 3 months correlation between American and Axiata is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding American Nortel Communications and Axiata Group Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axiata Group Berhad and American Nortel 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 American Nortel Communications are associated (or correlated) with Axiata Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axiata Group Berhad has no effect on the direction of American Nortel i.e., American Nortel and Axiata Group go up and down completely randomly.

Pair Corralation between American Nortel and Axiata Group

Given the investment horizon of 90 days American Nortel Communications is expected to generate 5.08 times more return on investment than Axiata Group. However, American Nortel is 5.08 times more volatile than Axiata Group Berhad. It trades about 0.06 of its potential returns per unit of risk. Axiata Group Berhad is currently generating about 0.05 per unit of risk. If you would invest  3.30  in American Nortel Communications on October 24, 2024 and sell it today you would lose (0.51) from holding American Nortel Communications or give up 15.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.4%
Values	Daily Returns

American Nortel Communications  vs.  Axiata Group Berhad

American Nortel Comm

Risk-Adjusted Performance

2 of 100

Weak

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

Axiata Group Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Nortel and Axiata Group

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

The idea behind American Nortel Communications and Axiata Group Berhad 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.