Correlation Between Telefonica and Telecom Argentina
Can any of the company-specific risk be diversified away by investing in both Telefonica and Telecom Argentina 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 Telecom Argentina 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 Telecom Argentina SA, you can compare the effects of market volatilities on Telefonica and Telecom Argentina 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 Telecom Argentina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Telecom Argentina.
Diversification Opportunities for Telefonica and Telecom Argentina
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Telefonica and Telecom is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Telecom Argentina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Argentina 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 Telecom Argentina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Argentina has no effect on the direction of Telefonica i.e., Telefonica and Telecom Argentina go up and down completely randomly.
Pair Corralation between Telefonica and Telecom Argentina
Considering the 90-day investment horizon Telefonica is expected to generate 3.55 times less return on investment than Telecom Argentina. But when comparing it to its historical volatility, Telefonica SA ADR is 2.67 times less risky than Telecom Argentina. It trades about 0.06 of its potential returns per unit of risk. Telecom Argentina SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 448.00 in Telecom Argentina SA on August 23, 2024 and sell it today you would earn a total of 837.00 from holding Telecom Argentina SA or generate 186.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonica SA ADR vs. Telecom Argentina SA
Performance |
| Timeline |
| Telefonica SA ADR |
| Telecom Argentina |
Telefonica and Telecom Argentina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonica and Telecom Argentina
The main advantage of trading using opposite Telefonica and Telecom Argentina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica position performs unexpectedly, Telecom Argentina 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 Telecom Argentina will offset losses from the drop in Telecom Argentina's long position.| Telefonica vs. Orange SA ADR | Telefonica vs. SK Telecom Co | Telefonica vs. America Movil SAB | Telefonica vs. KT Corporation |
| Telecom Argentina vs. Telefonica SA ADR | Telecom Argentina vs. Orange SA ADR | Telecom Argentina vs. SK Telecom Co | Telecom Argentina vs. America Movil SAB |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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