Correlation Between Tele2 AB and Vodafone Group

Can any of the company-specific risk be diversified away by investing in both Tele2 AB 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 Tele2 AB and Vodafone Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tele2 AB and Vodafone Group PLC, you can compare the effects of market volatilities on Tele2 AB 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 Tele2 AB with a short position of Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and Vodafone Group.

Diversification Opportunities for Tele2 AB and Vodafone Group

0.71

Correlation Coefficient

Tele2 AB  Vodafone Group

Poor diversification

The 3 months correlation between Tele2 and Vodafone is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB 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 Tele2 AB 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 Tele2 AB 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 Tele2 AB i.e., Tele2 AB and Vodafone Group go up and down completely randomly.

Pair Corralation between Tele2 AB and Vodafone Group

Assuming the 90 days horizon Tele2 AB is expected to generate 0.61 times more return on investment than Vodafone Group. However, Tele2 AB is 1.64 times less risky than Vodafone Group. It trades about 0.19 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about 0.06 per unit of risk. If you would invest  495.00  in Tele2 AB on December 30, 2024 and sell it today you would earn a total of  141.00  from holding Tele2 AB or generate 28.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.16%
Values	Daily Returns

Tele2 AB  vs.  Vodafone Group PLC

Tele2 AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tele2 AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tele2 AB showed solid returns over the last few months and may actually be approaching a breakup point.

Vodafone Group PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Group PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vodafone Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tele2 AB and Vodafone Group

The main advantage of trading using opposite Tele2 AB and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tele2 AB 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 Tele2 AB 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.