Correlation Between MTN GHANA and GUINNESS GHANA

Can any of the company-specific risk be diversified away by investing in both MTN GHANA and GUINNESS GHANA 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 MTN GHANA and GUINNESS GHANA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MTN GHANA LTD and GUINNESS GHANA BREWERIES, you can compare the effects of market volatilities on MTN GHANA and GUINNESS GHANA 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 MTN GHANA with a short position of GUINNESS GHANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTN GHANA and GUINNESS GHANA.

Diversification Opportunities for MTN GHANA and GUINNESS GHANA

-0.17

Correlation Coefficient

MTN GHANA  GUINNESS GHANA

Good diversification

The 3 months correlation between MTN and GUINNESS is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding MTN GHANA LTD and GUINNESS GHANA BREWERIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUINNESS GHANA BREWERIES and MTN GHANA 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 MTN GHANA LTD are associated (or correlated) with GUINNESS GHANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUINNESS GHANA BREWERIES has no effect on the direction of MTN GHANA i.e., MTN GHANA and GUINNESS GHANA go up and down completely randomly.

Pair Corralation between MTN GHANA and GUINNESS GHANA

Assuming the 90 days trading horizon MTN GHANA LTD is expected to generate 1.03 times more return on investment than GUINNESS GHANA. However, MTN GHANA is 1.03 times more volatile than GUINNESS GHANA BREWERIES. It trades about 0.11 of its potential returns per unit of risk. GUINNESS GHANA BREWERIES is currently generating about -0.12 per unit of risk. If you would invest  219.00  in MTN GHANA LTD on September 5, 2024 and sell it today you would earn a total of  18.00  from holding MTN GHANA LTD or generate 8.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

MTN GHANA LTD  vs.  GUINNESS GHANA BREWERIES

MTN GHANA LTD

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MTN GHANA LTD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, MTN GHANA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GUINNESS GHANA BREWERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GUINNESS GHANA BREWERIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with MTN GHANA and GUINNESS GHANA

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

The idea behind MTN GHANA LTD and GUINNESS GHANA BREWERIES 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.