Correlation Between Telefonica and ATT
Can any of the company-specific risk be diversified away by investing in both Telefonica and ATT 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 Telefonica and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonica SA ADR and ATT Inc, you can compare the effects of market volatilities on Telefonica and ATT 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 Telefonica with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and ATT.
Diversification Opportunities for Telefonica and ATT
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Telefonica and ATT is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and Telefonica 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 Telefonica SA ADR are associated (or correlated) with ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Telefonica i.e., Telefonica and ATT go up and down completely randomly.
Pair Corralation between Telefonica and ATT
Considering the 90-day investment horizon Telefonica is expected to generate 2.62 times less return on investment than ATT. But when comparing it to its historical volatility, Telefonica SA ADR is 1.1 times less risky than ATT. It trades about 0.04 of its potential returns per unit of risk. ATT Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,397 in ATT Inc on August 27, 2024 and sell it today you would earn a total of 921.00 from holding ATT Inc or generate 65.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonica SA ADR vs. ATT Inc
Performance |
| Timeline |
| Telefonica SA ADR |
| ATT Inc |
Telefonica and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonica and ATT
The main advantage of trading using opposite Telefonica and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.| Telefonica vs. Liberty Broadband Srs | Telefonica vs. Ribbon Communications | Telefonica vs. Liberty Broadband Srs | Telefonica vs. Shenandoah Telecommunications Co |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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