Correlation Between Telecom Argentina and Vale SA
Can any of the company-specific risk be diversified away by investing in both Telecom Argentina and Vale 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 Telecom Argentina and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telecom Argentina and Vale SA, you can compare the effects of market volatilities on Telecom Argentina and Vale 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 Telecom Argentina with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Argentina and Vale SA.
Diversification Opportunities for Telecom Argentina and Vale SA
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Telecom and Vale is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Telecom Argentina 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 Telecom Argentina are associated (or correlated) with Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Telecom Argentina i.e., Telecom Argentina and Vale SA go up and down completely randomly.
Pair Corralation between Telecom Argentina and Vale SA
Assuming the 90 days trading horizon Telecom Argentina is expected to generate 1.65 times more return on investment than Vale SA. However, Telecom Argentina is 1.65 times more volatile than Vale SA. It trades about 0.16 of its potential returns per unit of risk. Vale SA is currently generating about -0.06 per unit of risk. If you would invest 181,500 in Telecom Argentina on November 2, 2024 and sell it today you would earn a total of 122,000 from holding Telecom Argentina or generate 67.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telecom Argentina vs. Vale SA
Performance |
| Timeline |
| Telecom Argentina |
| Vale SA |
Telecom Argentina and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telecom Argentina and Vale SA
The main advantage of trading using opposite Telecom Argentina and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Argentina position performs unexpectedly, Vale 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 Vale SA will offset losses from the drop in Vale SA's long position.| Telecom Argentina vs. Harmony Gold Mining | Telecom Argentina vs. Compania de Transporte | Telecom Argentina vs. United States Steel | Telecom Argentina vs. Agrometal SAI |
| Vale SA vs. BHP Group Limited | Vale SA vs. Rio Tinto PLC | Vale SA vs. Agrometal SAI | Vale SA vs. Grimoldi SA |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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