Correlation Between Vodafone Group and Telia Company

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

Diversification Opportunities for Vodafone Group and Telia Company

-0.5

Correlation Coefficient

Vodafone Group  Telia Company

Very good diversification

The 3 months correlation between Vodafone and Telia is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company 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 Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Vodafone Group i.e., Vodafone Group and Telia Company go up and down completely randomly.

Pair Corralation between Vodafone Group and Telia Company

If you would invest  95.00  in Vodafone Group PLC on October 5, 2024 and sell it today you would lose (10.00) from holding Vodafone Group PLC or give up 10.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.27%
Values	Daily Returns

Vodafone Group PLC  vs.  Telia Company AB

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telia Company AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Telia Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vodafone Group and Telia Company

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

The idea behind Vodafone Group PLC and Telia Company AB 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.