Correlation Between Singapore Telecommunicatio and MTN Group

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

By analyzing existing cross correlation between Singapore Telecommunications Limited and MTN Group Ltd, you can compare the effects of market volatilities on Singapore Telecommunicatio and MTN 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 Singapore Telecommunicatio with a short position of MTN Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Telecommunicatio and MTN Group.

Diversification Opportunities for Singapore Telecommunicatio and MTN Group

0.44

Correlation Coefficient

Singapore Telecommunicatio  MTN Group

Very weak diversification

The 3 months correlation between Singapore and MTN is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications L and MTN Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group and Singapore Telecommunicatio 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 Singapore Telecommunications Limited are associated (or correlated) with MTN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of Singapore Telecommunicatio i.e., Singapore Telecommunicatio and MTN Group go up and down completely randomly.

Pair Corralation between Singapore Telecommunicatio and MTN Group

Assuming the 90 days horizon Singapore Telecommunicatio is expected to generate 2.06 times less return on investment than MTN Group. But when comparing it to its historical volatility, Singapore Telecommunications Limited is 1.07 times less risky than MTN Group. It trades about 0.1 of its potential returns per unit of risk. MTN Group Ltd is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  495.00  in MTN Group Ltd on December 29, 2024 and sell it today you would earn a total of  176.00  from holding MTN Group Ltd or generate 35.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.52%
Values	Daily Returns

Singapore Telecommunications L  vs.  MTN Group Ltd

Singapore Telecommunicatio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Telecommunications Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Singapore Telecommunicatio reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Singapore Telecommunicatio and MTN Group

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

The idea behind Singapore Telecommunications Limited and MTN 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.