Correlation Between Ooma and Vodafone Group

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

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

Diversification Opportunities for Ooma and Vodafone Group

-0.6

Correlation Coefficient

Ooma  Vodafone Group

Excellent diversification

The 3 months correlation between Ooma and Vodafone is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ooma Inc 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 Ooma 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 Ooma Inc 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 Ooma i.e., Ooma and Vodafone Group go up and down completely randomly.

Pair Corralation between Ooma and Vodafone Group

Given the investment horizon of 90 days Ooma Inc is expected to under-perform the Vodafone Group. In addition to that, Ooma is 1.19 times more volatile than Vodafone Group PLC. It trades about -0.07 of its total potential returns per unit of risk. Vodafone Group PLC is currently generating about 0.13 per unit of volatility. If you would invest  842.00  in Vodafone Group PLC on December 28, 2024 and sell it today you would earn a total of  103.00  from holding Vodafone Group PLC or generate 12.23% return on investment over 90 days.

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

Ooma Inc  vs.  Vodafone Group PLC

Ooma Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ooma Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Group PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Vodafone Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ooma and Vodafone Group

The main advantage of trading using opposite Ooma and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ooma 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 Ooma Inc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.