Correlation Between Caixabank and Telefonica

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

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

Diversification Opportunities for Caixabank and Telefonica

-0.3

Correlation Coefficient

Caixabank  Telefonica

Very good diversification

The 3 months correlation between Caixabank and Telefonica is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA and Telefonica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica and Caixabank 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 Caixabank SA 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 has no effect on the direction of Caixabank i.e., Caixabank and Telefonica go up and down completely randomly.

Pair Corralation between Caixabank and Telefonica

Assuming the 90 days trading horizon Caixabank SA is expected to under-perform the Telefonica. In addition to that, Caixabank is 2.02 times more volatile than Telefonica. It trades about -0.02 of its total potential returns per unit of risk. Telefonica is currently generating about 0.02 per unit of volatility. If you would invest  424.00  in Telefonica on September 13, 2024 and sell it today you would earn a total of  4.00  from holding Telefonica or generate 0.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Caixabank SA  vs.  Telefonica

Caixabank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caixabank SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Caixabank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Telefonica

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Telefonica is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Caixabank and Telefonica

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

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.