Correlation Between Telenor ASA and Telefonica
Can any of the company-specific risk be diversified away by investing in both Telenor ASA and Telefonica 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 Telenor ASA and Telefonica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telenor ASA ADR and Telefonica SA ADR, you can compare the effects of market volatilities on Telenor ASA and Telefonica 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 Telenor ASA with a short position of Telefonica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telenor ASA and Telefonica.
Diversification Opportunities for Telenor ASA and Telefonica
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Telenor and Telefonica is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Telenor ASA ADR and Telefonica SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica SA ADR and Telenor ASA 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 Telenor ASA ADR are associated (or correlated) with Telefonica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica SA ADR has no effect on the direction of Telenor ASA i.e., Telenor ASA and Telefonica go up and down completely randomly.
Pair Corralation between Telenor ASA and Telefonica
Assuming the 90 days horizon Telenor ASA ADR is expected to generate 0.87 times more return on investment than Telefonica. However, Telenor ASA ADR is 1.15 times less risky than Telefonica. It trades about 0.53 of its potential returns per unit of risk. Telefonica SA ADR is currently generating about 0.07 per unit of risk. If you would invest 1,114 in Telenor ASA ADR on November 1, 2024 and sell it today you would earn a total of 116.00 from holding Telenor ASA ADR or generate 10.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telenor ASA ADR vs. Telefonica SA ADR
Performance |
| Timeline |
| Telenor ASA ADR |
| Telefonica SA ADR |
Telenor ASA and Telefonica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telenor ASA and Telefonica
The main advantage of trading using opposite Telenor ASA and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telenor ASA position performs unexpectedly, Telefonica 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 Telefonica will offset losses from the drop in Telefonica's long position.| Telenor ASA vs. PCCW Limited | Telenor ASA vs. Hellenic Telecommunications Org | Telenor ASA vs. Telefonica SA ADR | Telenor ASA vs. XL Axiata Tbk |
| Telefonica vs. SK Telecom Co | Telefonica vs. America Movil SAB | Telefonica vs. KT Corporation | Telefonica vs. Telefonica Brasil SA |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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