Can any of the company-specific risk be diversified away by investing in both VEON and America Movil 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 VEON and America Movil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VEON and America Movil SAB, you can compare the effects of market volatilities on VEON and America Movil 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 VEON with a short position of America Movil. Check out your portfolio center. Please also check ongoing floating volatility patterns of VEON and America Movil.
Diversification Opportunities for VEON and America Movil
The 3 months correlation between VEON and America is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding VEON and America Movil SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on America Movil SAB and VEON 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 VEON are associated (or correlated) with America Movil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of America Movil SAB has no effect on the direction of VEON i.e., VEON and America Movil go up and down completely randomly.
Given the investment horizon of 90 days VEON is expected to generate 1.02 times more return on investment than America Movil. However, VEON is 1.02 times more volatile than America Movil SAB. It trades about 0.02 of its potential returns per unit of risk. America Movil SAB is currently generating about -0.02 per unit of risk. If you would invest 2,575 in VEON on March 5, 2024 and sell it today you would earn a total of 25.00 from holding VEON or generate 0.97% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in VEON are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VEON is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Over the last 90 days America Movil SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, America Movil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.