Correlation Between Papaya Growth and Telenor ASA

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

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

Diversification Opportunities for Papaya Growth and Telenor ASA

-0.83

Correlation Coefficient

Papaya Growth  Telenor ASA

Pay attention - limited upside

The 3 months correlation between Papaya and Telenor is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Papaya Growth Opportunity and Telenor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA ADR and Papaya Growth 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 Papaya Growth Opportunity 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 ADR has no effect on the direction of Papaya Growth i.e., Papaya Growth and Telenor ASA go up and down completely randomly.

Pair Corralation between Papaya Growth and Telenor ASA

Given the investment horizon of 90 days Papaya Growth is expected to generate 2.61 times less return on investment than Telenor ASA. But when comparing it to its historical volatility, Papaya Growth Opportunity is 1.89 times less risky than Telenor ASA. It trades about 0.03 of its potential returns per unit of risk. Telenor ASA ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  908.00  in Telenor ASA ADR on October 8, 2024 and sell it today you would earn a total of  236.00  from holding Telenor ASA ADR or generate 25.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Papaya Growth Opportunity  vs.  Telenor ASA ADR

Papaya Growth Opportunity

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Papaya Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Telenor ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Papaya Growth and Telenor ASA

The main advantage of trading using opposite Papaya Growth and Telenor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Papaya Growth 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 Papaya Growth Opportunity and Telenor ASA ADR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.