Correlation Between Telefnica and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Telefnica 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 Telefnica and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefnica SA and Verizon Communications, you can compare the effects of market volatilities on Telefnica 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 Telefnica with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefnica and Verizon Communications.
Diversification Opportunities for Telefnica and Verizon Communications
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telefnica and Verizon is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica SA and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Telefnica 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 Telefnica SA 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 Telefnica i.e., Telefnica and Verizon Communications go up and down completely randomly.
Pair Corralation between Telefnica and Verizon Communications
Assuming the 90 days trading horizon Telefnica SA is expected to under-perform the Verizon Communications. In addition to that, Telefnica is 1.16 times more volatile than Verizon Communications. It trades about -0.04 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.2 per unit of volatility. If you would invest 3,966 in Verizon Communications on August 25, 2024 and sell it today you would earn a total of 217.00 from holding Verizon Communications or generate 5.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefnica SA vs. Verizon Communications
Performance |
| Timeline |
| Telefnica SA |
| Verizon Communications |
Telefnica and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefnica and Verizon Communications
The main advantage of trading using opposite Telefnica and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefnica 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.| Telefnica vs. SVB Financial Group | Telefnica vs. Capital One Financial | Telefnica vs. Ameriprise Financial | Telefnica vs. NXP Semiconductors NV |
| Verizon Communications vs. Costco Wholesale | Verizon Communications vs. Bread Financial Holdings | Verizon Communications vs. Charter Communications | Verizon Communications vs. Bemobi Mobile Tech |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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