Correlation Between Vodafone Group and China Tower

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

Diversification Opportunities for Vodafone Group and China Tower

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Vodafone and China is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and China Tower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Tower 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 China Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Tower has no effect on the direction of Vodafone Group i.e., Vodafone Group and China Tower go up and down completely randomly.

Pair Corralation between Vodafone Group and China Tower

Assuming the 90 days horizon Vodafone Group is expected to generate 79.97 times less return on investment than China Tower. But when comparing it to its historical volatility, Vodafone Group PLC is 8.25 times less risky than China Tower. It trades about 0.02 of its potential returns per unit of risk. China Tower is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  11.00  in China Tower on October 2, 2024 and sell it today you would earn a total of  3.00  from holding China Tower or generate 27.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy94.66%
ValuesDaily Returns

Vodafone Group PLC  vs.  China Tower

 Performance 
       Timeline  
Vodafone Group PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
China Tower 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in China Tower are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Tower reported solid returns over the last few months and may actually be approaching a breakup point.

Vodafone Group and China Tower Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vodafone Group and China Tower

The main advantage of trading using opposite Vodafone Group and China Tower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group position performs unexpectedly, China Tower 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 China Tower will offset losses from the drop in China Tower's long position.
The idea behind Vodafone Group PLC and China Tower 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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