Correlation Between TELEKOM NETWORK and FDH BANK

Can any of the company-specific risk be diversified away by investing in both TELEKOM NETWORK and FDH BANK 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 TELEKOM NETWORK and FDH BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TELEKOM NETWORK MALAWI and FDH BANK PLC, you can compare the effects of market volatilities on TELEKOM NETWORK and FDH BANK 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 TELEKOM NETWORK with a short position of FDH BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of TELEKOM NETWORK and FDH BANK.

Diversification Opportunities for TELEKOM NETWORK and FDH BANK

-0.71

Correlation Coefficient

TELEKOM NETWORK  FDH BANK

Pay attention - limited upside

The 3 months correlation between TELEKOM and FDH is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding TELEKOM NETWORK MALAWI and FDH BANK PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDH BANK PLC and TELEKOM NETWORK 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 TELEKOM NETWORK MALAWI are associated (or correlated) with FDH BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDH BANK PLC has no effect on the direction of TELEKOM NETWORK i.e., TELEKOM NETWORK and FDH BANK go up and down completely randomly.

Pair Corralation between TELEKOM NETWORK and FDH BANK

Assuming the 90 days trading horizon TELEKOM NETWORK MALAWI is expected to generate 18.77 times more return on investment than FDH BANK. However, TELEKOM NETWORK is 18.77 times more volatile than FDH BANK PLC. It trades about 0.22 of its potential returns per unit of risk. FDH BANK PLC is currently generating about -0.17 per unit of risk. If you would invest  2,000  in TELEKOM NETWORK MALAWI on October 11, 2024 and sell it today you would earn a total of  400.00  from holding TELEKOM NETWORK MALAWI or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

TELEKOM NETWORK MALAWI  vs.  FDH BANK PLC

TELEKOM NETWORK MALAWI

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TELEKOM NETWORK MALAWI are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, TELEKOM NETWORK exhibited solid returns over the last few months and may actually be approaching a breakup point.

FDH BANK PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FDH BANK PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FDH BANK is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TELEKOM NETWORK and FDH BANK

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

The idea behind TELEKOM NETWORK MALAWI and FDH BANK 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.