Correlation Between Vodafone Group and Oi SA

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

By analyzing existing cross correlation between Vodafone Group Public and Oi SA, you can compare the effects of market volatilities on Vodafone Group and Oi SA 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 Oi SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodafone Group and Oi SA.

Diversification Opportunities for Vodafone Group and Oi SA

0.36

Correlation Coefficient

Vodafone Group  Oi SA

Weak diversification

The 3 months correlation between Vodafone and OIBR3 is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group Public and Oi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oi SA 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 Public are associated (or correlated) with Oi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oi SA has no effect on the direction of Vodafone Group i.e., Vodafone Group and Oi SA go up and down completely randomly.

Pair Corralation between Vodafone Group and Oi SA

Assuming the 90 days trading horizon Vodafone Group Public is expected to generate 0.14 times more return on investment than Oi SA. However, Vodafone Group Public is 7.24 times less risky than Oi SA. It trades about -0.04 of its potential returns per unit of risk. Oi SA is currently generating about -0.08 per unit of risk. If you would invest  2,766  in Vodafone Group Public on September 13, 2024 and sell it today you would lose (138.00) from holding Vodafone Group Public or give up 4.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Vodafone Group Public  vs.  Oi SA

Vodafone Group Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Vodafone Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Oi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oi SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Vodafone Group and Oi SA

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

The idea behind Vodafone Group Public and Oi SA 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.