Correlation Between MTN Group and Vodacom Group

Can any of the company-specific risk be diversified away by investing in both MTN Group and Vodacom 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 MTN Group and Vodacom Group 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 Vodacom Group Ltd, you can compare the effects of market volatilities on MTN Group and Vodacom 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 MTN Group with a short position of Vodacom Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN Group and Vodacom Group.

Diversification Opportunities for MTN Group and Vodacom Group

0.92

Correlation Coefficient

MTN Group  Vodacom Group

Almost no diversification

The 3 months correlation between MTN and Vodacom is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group Ltd and Vodacom Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodacom Group 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 Vodacom Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodacom Group has no effect on the direction of MTN Group i.e., MTN Group and Vodacom Group go up and down completely randomly.

Pair Corralation between MTN Group and Vodacom Group

Assuming the 90 days horizon MTN Group Ltd is expected to generate 1.26 times more return on investment than Vodacom Group. However, MTN Group is 1.26 times more volatile than Vodacom Group Ltd. It trades about 0.2 of its potential returns per unit of risk. Vodacom Group Ltd is currently generating about 0.16 per unit of risk. If you would invest  495.00  in MTN Group Ltd on December 29, 2024 and sell it today you would earn a total of  179.00  from holding MTN Group Ltd or generate 36.16% return on investment over 90 days.

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

MTN Group Ltd  vs.  Vodacom Group Ltd

MTN Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MTN Group Ltd are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MTN Group showed solid returns over the last few months and may actually be approaching a breakup point.

Vodacom Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vodacom Group Ltd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Vodacom Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MTN Group and Vodacom Group

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

The idea behind MTN Group Ltd and Vodacom Group Ltd 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.