Correlation Between MTN Group and Telenor ASA

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

By analyzing existing cross correlation between MTN Group Ltd and Telenor ASA, you can compare the effects of market volatilities on MTN Group and Telenor ASA 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 MTN Group with a short position of Telenor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN Group and Telenor ASA.

Diversification Opportunities for MTN Group and Telenor ASA

0.21

Correlation Coefficient

MTN Group  Telenor ASA

Modest diversification

The 3 months correlation between MTN and Telenor is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group Ltd and Telenor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA and MTN Group 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 MTN Group Ltd are associated (or correlated) with Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA has no effect on the direction of MTN Group i.e., MTN Group and Telenor ASA go up and down completely randomly.

Pair Corralation between MTN Group and Telenor ASA

Assuming the 90 days horizon MTN Group Ltd is expected to generate 1.83 times more return on investment than Telenor ASA. However, MTN Group is 1.83 times more volatile than Telenor ASA. It trades about -0.01 of its potential returns per unit of risk. Telenor ASA is currently generating about -0.12 per unit of risk. If you would invest  500.00  in MTN Group Ltd on October 14, 2024 and sell it today you would lose (22.00) from holding MTN Group Ltd or give up 4.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MTN Group Ltd  vs.  Telenor ASA

MTN Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, MTN Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Telenor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telenor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with MTN Group and Telenor ASA

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

The idea behind MTN Group Ltd and Telenor ASA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.