Correlation Between PLDT and Telefonica
Can any of the company-specific risk be diversified away by investing in both PLDT 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 PLDT and Telefonica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PLDT Inc ADR and Telefonica SA ADR, you can compare the effects of market volatilities on PLDT 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 PLDT with a short position of Telefonica. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLDT and Telefonica.
Diversification Opportunities for PLDT and Telefonica
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PLDT and Telefonica is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PLDT Inc ADR and Telefonica SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica SA ADR and PLDT 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 PLDT Inc ADR 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 SA ADR has no effect on the direction of PLDT i.e., PLDT and Telefonica go up and down completely randomly.
Pair Corralation between PLDT and Telefonica
Considering the 90-day investment horizon PLDT Inc ADR is expected to under-perform the Telefonica. In addition to that, PLDT is 1.22 times more volatile than Telefonica SA ADR. It trades about -0.27 of its total potential returns per unit of risk. Telefonica SA ADR is currently generating about -0.08 per unit of volatility. If you would invest 466.00 in Telefonica SA ADR on August 30, 2024 and sell it today you would lose (13.00) from holding Telefonica SA ADR or give up 2.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
PLDT Inc ADR vs. Telefonica SA ADR
Performance |
| Timeline |
| PLDT Inc ADR |
| Telefonica SA ADR |
PLDT and Telefonica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PLDT and Telefonica
The main advantage of trading using opposite PLDT and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLDT 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.| PLDT vs. Shenandoah Telecommunications Co | PLDT vs. Liberty Broadband Corp | PLDT vs. Ooma Inc | PLDT vs. IDT Corporation |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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