Correlation Between Vodafone Group and Qwest Corp

Can any of the company-specific risk be diversified away by investing in both Vodafone Group and Qwest Corp 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 Qwest Corp 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 Qwest Corp NT, you can compare the effects of market volatilities on Vodafone Group and Qwest Corp 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 Qwest Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodafone Group and Qwest Corp.

Diversification Opportunities for Vodafone Group and Qwest Corp

0.82

Correlation Coefficient

Vodafone Group  Qwest Corp

Very poor diversification

The 3 months correlation between Vodafone and Qwest is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and Qwest Corp NT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qwest Corp NT 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 Qwest Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qwest Corp NT has no effect on the direction of Vodafone Group i.e., Vodafone Group and Qwest Corp go up and down completely randomly.

Pair Corralation between Vodafone Group and Qwest Corp

Considering the 90-day investment horizon Vodafone Group PLC is expected to generate 1.35 times more return on investment than Qwest Corp. However, Vodafone Group is 1.35 times more volatile than Qwest Corp NT. It trades about 0.13 of its potential returns per unit of risk. Qwest Corp NT is currently generating about 0.0 per unit of risk. If you would invest  842.00  in Vodafone Group PLC on December 28, 2024 and sell it today you would earn a total of  103.00  from holding Vodafone Group PLC or generate 12.23% return on investment over 90 days.

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

Vodafone Group PLC  vs.  Qwest Corp NT

Vodafone Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vodafone Group PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Vodafone Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Qwest Corp NT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qwest Corp NT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Qwest Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vodafone Group and Qwest Corp

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

The idea behind Vodafone Group PLC and Qwest Corp NT 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.