Correlation Between TELEKOM NETWORK and NICO HOLDINGS

Can any of the company-specific risk be diversified away by investing in both TELEKOM NETWORK and NICO HOLDINGS 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 NICO HOLDINGS 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 NICO HOLDINGS LIMITED, you can compare the effects of market volatilities on TELEKOM NETWORK and NICO HOLDINGS 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 NICO HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of TELEKOM NETWORK and NICO HOLDINGS.

Diversification Opportunities for TELEKOM NETWORK and NICO HOLDINGS

0.48

Correlation Coefficient

TELEKOM NETWORK  NICO HOLDINGS

Very weak diversification

The 3 months correlation between TELEKOM and NICO is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding TELEKOM NETWORK MALAWI and NICO HOLDINGS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICO HOLDINGS LIMITED 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 NICO HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICO HOLDINGS LIMITED has no effect on the direction of TELEKOM NETWORK i.e., TELEKOM NETWORK and NICO HOLDINGS go up and down completely randomly.

Pair Corralation between TELEKOM NETWORK and NICO HOLDINGS

Assuming the 90 days trading horizon TELEKOM NETWORK MALAWI is expected to under-perform the NICO HOLDINGS. But the stock apears to be less risky and, when comparing its historical volatility, TELEKOM NETWORK MALAWI is 4.12 times less risky than NICO HOLDINGS. The stock trades about -0.35 of its potential returns per unit of risk. The NICO HOLDINGS LIMITED is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  32,000  in NICO HOLDINGS LIMITED on October 12, 2024 and sell it today you would earn a total of  9,900  from holding NICO HOLDINGS LIMITED or generate 30.94% return on investment over 90 days.

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

TELEKOM NETWORK MALAWI  vs.  NICO HOLDINGS LIMITED

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.

NICO HOLDINGS LIMITED

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NICO HOLDINGS LIMITED are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NICO HOLDINGS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TELEKOM NETWORK and NICO HOLDINGS

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

The idea behind TELEKOM NETWORK MALAWI and NICO HOLDINGS LIMITED 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.