Correlation Between Enags SA and Telefonica
Can any of the company-specific risk be diversified away by investing in both Enags SA and Telefonica 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 Enags SA and Telefonica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enags SA and Telefonica, you can compare the effects of market volatilities on Enags SA and Telefonica 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 Enags SA with a short position of Telefonica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enags SA and Telefonica.
Diversification Opportunities for Enags SA and Telefonica
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Enags and Telefonica is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Enags SA and Telefonica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica and Enags SA 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 Enags SA are associated (or correlated) with Telefonica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica has no effect on the direction of Enags SA i.e., Enags SA and Telefonica go up and down completely randomly.
Pair Corralation between Enags SA and Telefonica
Assuming the 90 days trading horizon Enags SA is expected to under-perform the Telefonica. But the stock apears to be less risky and, when comparing its historical volatility, Enags SA is 1.35 times less risky than Telefonica. The stock trades about -0.12 of its potential returns per unit of risk. The Telefonica is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 434.00 in Telefonica on August 31, 2024 and sell it today you would earn a total of 2.00 from holding Telefonica or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enags SA vs. Telefonica
Performance |
| Timeline |
| Enags SA |
| Telefonica |
Enags SA and Telefonica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enags SA and Telefonica
The main advantage of trading using opposite Enags SA and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enags SA position performs unexpectedly, Telefonica 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 Telefonica will offset losses from the drop in Telefonica's long position.The idea behind Enags SA and Telefonica 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.| Telefonica vs. ACS Actividades de | Telefonica vs. Ferrovial | Telefonica vs. Melia Hotels | Telefonica vs. Lyxor UCITS Ibex35 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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