Correlation Between Telenor ASA and Nippon Telegraph

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

By analyzing existing cross correlation between Telenor ASA ADR and Nippon Telegraph and, you can compare the effects of market volatilities on Telenor ASA and Nippon Telegraph 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 Nippon Telegraph. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telenor ASA and Nippon Telegraph.

Diversification Opportunities for Telenor ASA and Nippon Telegraph

0.0

Correlation Coefficient

Telenor ASA  Nippon Telegraph

Pay attention - limited upside

The 3 months correlation between Telenor and Nippon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Telenor ASA ADR and Nippon Telegraph and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Telegraph 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 ADR are associated (or correlated) with Nippon Telegraph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Telegraph has no effect on the direction of Telenor ASA i.e., Telenor ASA and Nippon Telegraph go up and down completely randomly.

Pair Corralation between Telenor ASA and Nippon Telegraph

If you would invest  1,176  in Telenor ASA ADR on November 28, 2024 and sell it today you would earn a total of  136.00  from holding Telenor ASA ADR or generate 11.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Telenor ASA ADR  vs.  Nippon Telegraph and

Telenor ASA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telenor ASA ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Telenor ASA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Nippon Telegraph

Risk-Adjusted Performance

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.

Pair Trading with Telenor ASA and Nippon Telegraph

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

The idea behind Telenor ASA ADR and Nippon Telegraph and 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.