Correlation Between Vodafone Group and Proximus

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

Diversification Opportunities for Vodafone Group and Proximus

0.55

Correlation Coefficient

Vodafone Group  Proximus

Very weak diversification

The 3 months correlation between Vodafone and Proximus is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and Proximus NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proximus NV ADR 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 Proximus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proximus NV ADR has no effect on the direction of Vodafone Group i.e., Vodafone Group and Proximus go up and down completely randomly.

Pair Corralation between Vodafone Group and Proximus

Assuming the 90 days horizon Vodafone Group PLC is expected to generate 1.17 times more return on investment than Proximus. However, Vodafone Group is 1.17 times more volatile than Proximus NV ADR. It trades about 0.0 of its potential returns per unit of risk. Proximus NV ADR is currently generating about 0.0 per unit of risk. If you would invest  100.00  in Vodafone Group PLC on November 28, 2024 and sell it today you would lose (17.00) from holding Vodafone Group PLC or give up 17.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.4%
Values	Daily Returns

Vodafone Group PLC  vs.  Proximus NV ADR

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. Despite nearly stable basic indicators, Vodafone Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Proximus NV ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Proximus NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Vodafone Group and Proximus

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

The idea behind Vodafone Group PLC and Proximus NV ADR 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.