Correlation Between MTN Group and Vodafone Group

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

Diversification Opportunities for MTN Group and Vodafone Group

0.87

Correlation Coefficient

MTN Group  Vodafone Group

Very poor diversification

The 3 months correlation between MTN and Vodafone is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MTN Group Ltd and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of MTN Group i.e., MTN Group and Vodafone Group go up and down completely randomly.

Pair Corralation between MTN Group and Vodafone Group

Assuming the 90 days horizon MTN Group Ltd is expected to under-perform the Vodafone Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, MTN Group Ltd is 1.59 times less risky than Vodafone Group. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Vodafone Group PLC is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  97.00  in Vodafone Group PLC on August 30, 2024 and sell it today you would lose (9.00) from holding Vodafone Group PLC or give up 9.28% of portfolio value over 90 days.

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

MTN Group Ltd  vs.  Vodafone Group PLC

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Vodafone Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vodafone 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 MTN Group and Vodafone Group

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

The idea behind MTN Group Ltd and Vodafone Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.