Correlation Between Telefonica and Vodafone Group
Can any of the company-specific risk be diversified away by investing in both Telefonica and Vodafone Group 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 Vodafone Group 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 Vodafone Group PLC, you can compare the effects of market volatilities on Telefonica and Vodafone Group 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 Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Vodafone Group.
Diversification Opportunities for Telefonica and Vodafone Group
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telefonica and Vodafone is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of Telefonica i.e., Telefonica and Vodafone Group go up and down completely randomly.
Pair Corralation between Telefonica and Vodafone Group
Considering the 90-day investment horizon Telefonica SA ADR is expected to generate 0.83 times more return on investment than Vodafone Group. However, Telefonica SA ADR is 1.2 times less risky than Vodafone Group. It trades about 0.26 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about -0.04 per unit of risk. If you would invest 403.00 in Telefonica SA ADR on November 18, 2024 and sell it today you would earn a total of 25.00 from holding Telefonica SA ADR or generate 6.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonica SA ADR vs. Vodafone Group PLC
Performance |
| Timeline |
| Telefonica SA ADR |
| Vodafone Group PLC |
Telefonica and Vodafone Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonica and Vodafone Group
The main advantage of trading using opposite Telefonica and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica position performs unexpectedly, Vodafone Group 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 Vodafone Group will offset losses from the drop in Vodafone Group's long position.| Telefonica vs. SK Telecom Co | Telefonica vs. America Movil SAB | Telefonica vs. KT Corporation | Telefonica vs. Telefonica Brasil SA |
| Vodafone Group vs. Telefonica Brasil SA | Vodafone Group vs. Grupo Televisa SAB | Vodafone Group vs. America Movil SAB | Vodafone Group vs. Telefonica SA ADR |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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