Correlation Between Tele2 AB and Telefonica
Can any of the company-specific risk be diversified away by investing in both Tele2 AB 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 Tele2 AB and Telefonica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tele2 AB and Telefonica SA ADR, you can compare the effects of market volatilities on Tele2 AB 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 Tele2 AB with a short position of Telefonica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and Telefonica.
Diversification Opportunities for Tele2 AB and Telefonica
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tele2 and Telefonica is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB 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 Tele2 AB 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 Tele2 AB 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 Tele2 AB i.e., Tele2 AB and Telefonica go up and down completely randomly.
Pair Corralation between Tele2 AB and Telefonica
Assuming the 90 days horizon Tele2 AB is expected to generate 1.2 times less return on investment than Telefonica. In addition to that, Tele2 AB is 1.49 times more volatile than Telefonica SA ADR. It trades about 0.04 of its total potential returns per unit of risk. Telefonica SA ADR is currently generating about 0.07 per unit of volatility. If you would invest 304.00 in Telefonica SA ADR on September 1, 2024 and sell it today you would earn a total of 145.00 from holding Telefonica SA ADR or generate 47.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Tele2 AB vs. Telefonica SA ADR
Performance |
| Timeline |
| Tele2 AB |
| Telefonica SA ADR |
Tele2 AB and Telefonica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tele2 AB and Telefonica
The main advantage of trading using opposite Tele2 AB and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tele2 AB 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.| Tele2 AB vs. Proximus NV ADR | Tele2 AB vs. Telstra Limited | Tele2 AB vs. Singapore Telecommunications Limited | Tele2 AB vs. Vodafone Group PLC |
| Telefonica vs. Orange SA ADR | Telefonica vs. SK Telecom Co | Telefonica vs. America Movil SAB | Telefonica vs. KT Corporation |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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