Correlation Between Vodafone Group and Ooma

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

Diversification Opportunities for Vodafone Group and Ooma

0.38

Correlation Coefficient

Vodafone Group  Ooma

Weak diversification

The 3 months correlation between Vodafone and Ooma is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and Ooma Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ooma Inc 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 Ooma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ooma Inc has no effect on the direction of Vodafone Group i.e., Vodafone Group and Ooma go up and down completely randomly.

Pair Corralation between Vodafone Group and Ooma

Considering the 90-day investment horizon Vodafone Group PLC is expected to under-perform the Ooma. But the stock apears to be less risky and, when comparing its historical volatility, Vodafone Group PLC is 1.6 times less risky than Ooma. The stock trades about -0.02 of its potential returns per unit of risk. The Ooma Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,480  in Ooma Inc on November 28, 2024 and sell it today you would earn a total of  1.00  from holding Ooma Inc or generate 0.07% return on investment over 90 days.

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

Vodafone Group PLC  vs.  Ooma Inc

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. In spite of rather sound basic indicators, Vodafone Group is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ooma Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Ooma Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Ooma is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vodafone Group and Ooma

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

The idea behind Vodafone Group PLC and Ooma Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.