Correlation Between Nippon Telegraph and Airtel Africa

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

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

Diversification Opportunities for Nippon Telegraph and Airtel Africa

0.18

Correlation Coefficient

Nippon Telegraph  Airtel Africa

Average diversification

The 3 months correlation between Nippon and Airtel is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Telegraph and 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 Nippon Telegraph 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 Nippon Telegraph and 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 Nippon Telegraph i.e., Nippon Telegraph and Airtel Africa go up and down completely randomly.

Pair Corralation between Nippon Telegraph and Airtel Africa

If you would invest  143.00  in Airtel Africa Plc on October 26, 2024 and sell it today you would earn a total of  7.00  from holding Airtel Africa Plc or generate 4.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

Nippon Telegraph and  vs.  Airtel Africa Plc

Nippon Telegraph

Risk-Adjusted Performance

0 of 100

Very Weak

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

Airtel Africa Plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Airtel Africa Plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Airtel Africa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Telegraph and Airtel Africa

The main advantage of trading using opposite Nippon Telegraph and Airtel Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Telegraph 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 Nippon Telegraph and 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.