Correlation Between Comcast Corp and Telefonica

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

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

Diversification Opportunities for Comcast Corp and Telefonica

-0.61

Correlation Coefficient

Comcast Corp  Telefonica

Excellent diversification

The 3 months correlation between Comcast and Telefonica is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Comcast Corp 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 Comcast Corp 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 Comcast Corp 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 Comcast Corp i.e., Comcast Corp and Telefonica go up and down completely randomly.

Pair Corralation between Comcast Corp and Telefonica

Assuming the 90 days horizon Comcast Corp is expected to generate 1.3 times more return on investment than Telefonica. However, Comcast Corp is 1.3 times more volatile than Telefonica SA ADR. It trades about 0.1 of its potential returns per unit of risk. Telefonica SA ADR is currently generating about -0.05 per unit of risk. If you would invest  3,950  in Comcast Corp on September 5, 2024 and sell it today you would earn a total of  336.00  from holding Comcast Corp or generate 8.51% return on investment over 90 days.

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

Comcast Corp  vs.  Telefonica SA ADR

Comcast Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Comcast Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Comcast Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Telefonica SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonica SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Telefonica is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Comcast Corp and Telefonica

The main advantage of trading using opposite Comcast Corp and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comcast Corp 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 Comcast Corp and Telefonica SA ADR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.