Correlation Between Advanced Info and Airtel Africa

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

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

Diversification Opportunities for Advanced Info and Airtel Africa

0.19

Correlation Coefficient

Advanced Info  Airtel Africa

Average diversification

The 3 months correlation between Advanced and Airtel is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Info Service 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 Advanced Info 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 Advanced Info Service 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 Advanced Info i.e., Advanced Info and Airtel Africa go up and down completely randomly.

Pair Corralation between Advanced Info and Airtel Africa

Assuming the 90 days horizon Advanced Info Service is expected to generate 0.76 times more return on investment than Airtel Africa. However, Advanced Info Service is 1.31 times less risky than Airtel Africa. It trades about 0.04 of its potential returns per unit of risk. Airtel Africa Plc is currently generating about 0.03 per unit of risk. If you would invest  609.00  in Advanced Info Service on October 22, 2024 and sell it today you would earn a total of  236.00  from holding Advanced Info Service or generate 38.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.47%
Values	Daily Returns

Advanced Info Service  vs.  Airtel Africa Plc

Advanced Info Service

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Info Service are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Advanced Info is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Advanced Info and Airtel Africa

The main advantage of trading using opposite Advanced Info and Airtel Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Info 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 Advanced Info Service 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.