Correlation Between Arrow Financial and TELEFONICA

Can any of the company-specific risk be diversified away by investing in both Arrow Financial 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 Arrow Financial and TELEFONICA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arrow Financial and TELEFONICA EUROPE B, you can compare the effects of market volatilities on Arrow Financial 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 Arrow Financial with a short position of TELEFONICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Financial and TELEFONICA.

Diversification Opportunities for Arrow Financial and TELEFONICA

-0.49

Correlation Coefficient

Arrow Financial  TELEFONICA

Very good diversification

The 3 months correlation between Arrow and TELEFONICA is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and TELEFONICA EUROPE B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELEFONICA EUROPE and Arrow Financial 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 Arrow Financial 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 EUROPE has no effect on the direction of Arrow Financial i.e., Arrow Financial and TELEFONICA go up and down completely randomly.

Pair Corralation between Arrow Financial and TELEFONICA

Given the investment horizon of 90 days Arrow Financial is expected to generate 5.57 times more return on investment than TELEFONICA. However, Arrow Financial is 5.57 times more volatile than TELEFONICA EUROPE B. It trades about 0.08 of its potential returns per unit of risk. TELEFONICA EUROPE B is currently generating about -0.18 per unit of risk. If you would invest  2,889  in Arrow Financial on September 14, 2024 and sell it today you would earn a total of  307.00  from holding Arrow Financial or generate 10.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Arrow Financial  vs.  TELEFONICA EUROPE B

Arrow Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Arrow Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TELEFONICA EUROPE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELEFONICA EUROPE B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TELEFONICA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arrow Financial and TELEFONICA

The main advantage of trading using opposite Arrow Financial and TELEFONICA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Financial 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.

The idea behind Arrow Financial and TELEFONICA EUROPE B pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.