Correlation Between Vodafone Group and GlobalData PLC

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

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

Diversification Opportunities for Vodafone Group and GlobalData PLC

0.04

Correlation Coefficient

Vodafone Group  GlobalData PLC

Significant diversification

The 3 months correlation between Vodafone and GlobalData is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and GlobalData PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlobalData PLC and Vodafone Group 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 Vodafone Group PLC are associated (or correlated) with GlobalData PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlobalData PLC has no effect on the direction of Vodafone Group i.e., Vodafone Group and GlobalData PLC go up and down completely randomly.

Pair Corralation between Vodafone Group and GlobalData PLC

Assuming the 90 days trading horizon Vodafone Group PLC is expected to under-perform the GlobalData PLC. But the stock apears to be less risky and, when comparing its historical volatility, Vodafone Group PLC is 1.05 times less risky than GlobalData PLC. The stock trades about -0.12 of its potential returns per unit of risk. The GlobalData PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  20,400  in GlobalData PLC on October 10, 2024 and sell it today you would earn a total of  200.00  from holding GlobalData PLC or generate 0.98% return on investment over 90 days.

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

Vodafone Group PLC  vs.  GlobalData PLC

Vodafone Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

GlobalData PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GlobalData PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GlobalData PLC 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 Vodafone Group and GlobalData PLC

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

The idea behind Vodafone Group PLC and GlobalData 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.