Correlation Between Vodacom and Advtech

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

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

Diversification Opportunities for Vodacom and Advtech

0.02

Correlation Coefficient

Vodacom  Advtech

Significant diversification

The 3 months correlation between Vodacom and Advtech is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Vodacom Group and Advtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advtech and Vodacom 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 Vodacom Group are associated (or correlated) with Advtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advtech has no effect on the direction of Vodacom i.e., Vodacom and Advtech go up and down completely randomly.

Pair Corralation between Vodacom and Advtech

Assuming the 90 days trading horizon Vodacom Group is expected to under-perform the Advtech. In addition to that, Vodacom is 1.03 times more volatile than Advtech. It trades about -0.16 of its total potential returns per unit of risk. Advtech is currently generating about -0.04 per unit of volatility. If you would invest  332,600  in Advtech on October 12, 2024 and sell it today you would lose (3,600) from holding Advtech or give up 1.08% of portfolio value over 90 days.

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

Vodacom Group  vs.  Advtech

Vodacom Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodacom Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Vodacom is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Advtech

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advtech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Advtech is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vodacom and Advtech

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

The idea behind Vodacom Group and Advtech 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.