Correlation Between TPG Telecom and Vodafone Group

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

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

Diversification Opportunities for TPG Telecom and Vodafone Group

-0.02

Correlation Coefficient

TPG Telecom  Vodafone Group

Good diversification

The 3 months correlation between TPG and Vodafone is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding TPG Telecom Limited 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 TPG Telecom 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 TPG Telecom Limited 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 TPG Telecom i.e., TPG Telecom and Vodafone Group go up and down completely randomly.

Pair Corralation between TPG Telecom and Vodafone Group

Assuming the 90 days horizon TPG Telecom Limited is expected to under-perform the Vodafone Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, TPG Telecom Limited is 1.46 times less risky than Vodafone Group. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Vodafone Group PLC is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  89.00  in Vodafone Group PLC on November 28, 2024 and sell it today you would lose (6.00) from holding Vodafone Group PLC or give up 6.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.03%
Values	Daily Returns

TPG Telecom Limited  vs.  Vodafone Group PLC

TPG Telecom Limited

Risk-Adjusted Performance

Very Weak

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

Vodafone Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vodafone Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TPG Telecom and Vodafone Group

The main advantage of trading using opposite TPG Telecom and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG Telecom 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 TPG Telecom Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.