Correlation Between Telenor ASA and Vodacom Group

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

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

Diversification Opportunities for Telenor ASA and Vodacom Group

0.68

Correlation Coefficient

Telenor ASA  Vodacom Group

Poor diversification

The 3 months correlation between Telenor and Vodacom is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Telenor ASA and Vodacom Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodacom Group and Telenor ASA 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 Telenor ASA are associated (or correlated) with Vodacom Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodacom Group has no effect on the direction of Telenor ASA i.e., Telenor ASA and Vodacom Group go up and down completely randomly.

Pair Corralation between Telenor ASA and Vodacom Group

Assuming the 90 days horizon Telenor ASA is expected to under-perform the Vodacom Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Telenor ASA is 1.91 times less risky than Vodacom Group. The pink sheet trades about -0.35 of its potential returns per unit of risk. The Vodacom Group Ltd is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  562.00  in Vodacom Group Ltd on September 25, 2024 and sell it today you would lose (11.00) from holding Vodacom Group Ltd or give up 1.96% of portfolio value over 90 days.

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

Telenor ASA  vs.  Vodacom Group Ltd

Telenor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telenor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Vodacom Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodacom Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Telenor ASA and Vodacom Group

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

The idea behind Telenor ASA and Vodacom 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.