Correlation Between Vodacom Group and Nippon Telegraph

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

By analyzing existing cross correlation between Vodacom Group Ltd and Nippon Telegraph Telephone, you can compare the effects of market volatilities on Vodacom Group and Nippon Telegraph 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 Vodacom Group with a short position of Nippon Telegraph. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodacom Group and Nippon Telegraph.

Diversification Opportunities for Vodacom Group and Nippon Telegraph

0.53

Correlation Coefficient

Vodacom Group  Nippon Telegraph

Very weak diversification

The 3 months correlation between Vodacom and Nippon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vodacom Group Ltd and Nippon Telegraph Telephone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Telegraph Tel and Vodacom 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 Vodacom Group Ltd are associated (or correlated) with Nippon Telegraph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Telegraph Tel has no effect on the direction of Vodacom Group i.e., Vodacom Group and Nippon Telegraph go up and down completely randomly.

Pair Corralation between Vodacom Group and Nippon Telegraph

Assuming the 90 days horizon Vodacom Group Ltd is expected to generate 0.55 times more return on investment than Nippon Telegraph. However, Vodacom Group Ltd is 1.82 times less risky than Nippon Telegraph. It trades about -0.05 of its potential returns per unit of risk. Nippon Telegraph Telephone is currently generating about -0.04 per unit of risk. If you would invest  639.00  in Vodacom Group Ltd on September 12, 2024 and sell it today you would lose (46.00) from holding Vodacom Group Ltd or give up 7.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Vodacom Group Ltd  vs.  Nippon Telegraph Telephone

Vodacom Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nippon Telegraph Tel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Telegraph Telephone has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Vodacom Group and Nippon Telegraph

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

The idea behind Vodacom Group Ltd and Nippon Telegraph Telephone 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.