Correlation Between Corporacion America and TELEFONICA

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

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

Diversification Opportunities for Corporacion America and TELEFONICA

-0.63

Correlation Coefficient

Corporacion America  TELEFONICA

Excellent diversification

The 3 months correlation between Corporacion and TELEFONICA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Corporacion America Airports and TELEFONICA EUROPE B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELEFONICA EUROPE and Corporacion America 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 Corporacion America Airports 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 Corporacion America i.e., Corporacion America and TELEFONICA go up and down completely randomly.

Pair Corralation between Corporacion America and TELEFONICA

Given the investment horizon of 90 days Corporacion America Airports is expected to generate 5.42 times more return on investment than TELEFONICA. However, Corporacion America is 5.42 times more volatile than TELEFONICA EUROPE B. It trades about 0.14 of its potential returns per unit of risk. TELEFONICA EUROPE B is currently generating about -0.17 per unit of risk. If you would invest  1,665  in Corporacion America Airports on September 12, 2024 and sell it today you would earn a total of  325.00  from holding Corporacion America Airports or generate 19.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Corporacion America Airports  vs.  TELEFONICA EUROPE B

Corporacion America

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corporacion America Airports are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Corporacion America reported solid returns over the last few months and may actually be approaching a breakup point.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Corporacion America and TELEFONICA

The main advantage of trading using opposite Corporacion America and TELEFONICA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporacion America 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 Corporacion America Airports 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.