Correlation Between APT Satellite and Airtel Africa

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

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

Diversification Opportunities for APT Satellite and Airtel Africa

-0.68

Correlation Coefficient

APT Satellite  Airtel Africa

Excellent diversification

The 3 months correlation between APT and Airtel is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding APT Satellite Holdings and Airtel Africa Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airtel Africa Plc and APT Satellite 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 APT Satellite Holdings are associated (or correlated) with Airtel Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airtel Africa Plc has no effect on the direction of APT Satellite i.e., APT Satellite and Airtel Africa go up and down completely randomly.

Pair Corralation between APT Satellite and Airtel Africa

Assuming the 90 days horizon APT Satellite Holdings is expected to generate 1.69 times more return on investment than Airtel Africa. However, APT Satellite is 1.69 times more volatile than Airtel Africa Plc. It trades about 0.01 of its potential returns per unit of risk. Airtel Africa Plc is currently generating about 0.02 per unit of risk. If you would invest  34.00  in APT Satellite Holdings on October 5, 2024 and sell it today you would lose (6.00) from holding APT Satellite Holdings or give up 17.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	34.8%
Values	Daily Returns

APT Satellite Holdings  vs.  Airtel Africa Plc

APT Satellite Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with APT Satellite and Airtel Africa

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

The idea behind APT Satellite Holdings and Airtel Africa Plc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.