Correlation Between Vodafone Group and SwissCom

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

Diversification Opportunities for Vodafone Group and SwissCom

0.67

Correlation Coefficient

Vodafone Group  SwissCom

Poor diversification

The 3 months correlation between Vodafone and SwissCom is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and SwissCom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SwissCom AG 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 SwissCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SwissCom AG has no effect on the direction of Vodafone Group i.e., Vodafone Group and SwissCom go up and down completely randomly.

Pair Corralation between Vodafone Group and SwissCom

Considering the 90-day investment horizon Vodafone Group is expected to generate 1.93 times less return on investment than SwissCom. In addition to that, Vodafone Group is 1.67 times more volatile than SwissCom AG. It trades about 0.01 of its total potential returns per unit of risk. SwissCom AG is currently generating about 0.03 per unit of volatility. If you would invest  5,033  in SwissCom AG on October 9, 2024 and sell it today you would earn a total of  556.00  from holding SwissCom AG or generate 11.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Vodafone Group PLC  vs.  SwissCom AG

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 abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

SwissCom AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SwissCom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vodafone Group and SwissCom

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

The idea behind Vodafone Group PLC and SwissCom AG 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.