Correlation Between Telefonica and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Telefonica and Verizon Communications 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 Verizon Communications 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 Verizon Communications, you can compare the effects of market volatilities on Telefonica and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Verizon Communications.
Diversification Opportunities for Telefonica and Verizon Communications
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Telefonica and Verizon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Telefonica i.e., Telefonica and Verizon Communications go up and down completely randomly.
Pair Corralation between Telefonica and Verizon Communications
Considering the 90-day investment horizon Telefonica SA ADR is expected to generate 1.17 times more return on investment than Verizon Communications. However, Telefonica is 1.17 times more volatile than Verizon Communications. It trades about 0.26 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.27 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonica SA ADR vs. Verizon Communications
Performance |
| Timeline |
| Telefonica SA ADR |
| Verizon Communications |
Telefonica and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonica and Verizon Communications
The main advantage of trading using opposite Telefonica and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| Telefonica vs. SK Telecom Co | Telefonica vs. America Movil SAB | Telefonica vs. KT Corporation | Telefonica vs. Telefonica Brasil SA |
| Verizon Communications vs. T Mobile | Verizon Communications vs. Lumen Technologies | Verizon Communications vs. Comcast Corp | Verizon Communications vs. ATT Inc |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |