Correlation Between Telefonica and Telephone
Can any of the company-specific risk be diversified away by investing in both Telefonica and Telephone 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 Telephone 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 Telephone and Data, you can compare the effects of market volatilities on Telefonica and Telephone 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 Telephone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Telephone.
Diversification Opportunities for Telefonica and Telephone
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Telefonica and Telephone is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Telephone and Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telephone and Data 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 Telephone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telephone and Data has no effect on the direction of Telefonica i.e., Telefonica and Telephone go up and down completely randomly.
Pair Corralation between Telefonica and Telephone
Considering the 90-day investment horizon Telefonica SA ADR is expected to under-perform the Telephone. But the stock apears to be less risky and, when comparing its historical volatility, Telefonica SA ADR is 1.53 times less risky than Telephone. The stock trades about -0.01 of its potential returns per unit of risk. The Telephone and Data is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,786 in Telephone and Data on August 28, 2024 and sell it today you would earn a total of 152.00 from holding Telephone and Data or generate 8.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonica SA ADR vs. Telephone and Data
Performance |
| Timeline |
| Telefonica SA ADR |
| Telephone and Data |
Telefonica and Telephone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonica and Telephone
The main advantage of trading using opposite Telefonica and Telephone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica position performs unexpectedly, Telephone 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 Telephone will offset losses from the drop in Telephone's long position.| Telefonica vs. Liberty Broadband Srs | Telefonica vs. Ribbon Communications | Telefonica vs. Liberty Broadband Srs | Telefonica vs. Shenandoah Telecommunications Co |
| Telephone vs. Telephone and Data | Telephone vs. ATT Inc | Telephone vs. Liberty Broadband Corp | Telephone vs. SiriusPoint |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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