Correlation Between Telefnica and SwissCom

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

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

Diversification Opportunities for Telefnica and SwissCom

0.59

Correlation Coefficient

Telefnica  SwissCom

Very weak diversification

The 3 months correlation between Telefnica and SwissCom is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica SA and SwissCom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SwissCom AG and Telefnica 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 Telefnica SA are associated (or correlated) with SwissCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SwissCom AG has no effect on the direction of Telefnica i.e., Telefnica and SwissCom go up and down completely randomly.

Pair Corralation between Telefnica and SwissCom

Assuming the 90 days horizon Telefnica SA is expected to generate 3.02 times more return on investment than SwissCom. However, Telefnica is 3.02 times more volatile than SwissCom AG. It trades about -0.01 of its potential returns per unit of risk. SwissCom AG is currently generating about -0.16 per unit of risk. If you would invest  468.00  in Telefnica SA on September 5, 2024 and sell it today you would lose (27.00) from holding Telefnica SA or give up 5.77% of portfolio value over 90 days.

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

Telefnica SA  vs.  SwissCom AG

Telefnica SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

SwissCom AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SwissCom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Telefnica and SwissCom

The main advantage of trading using opposite Telefnica and SwissCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefnica position performs unexpectedly, SwissCom 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 SwissCom will offset losses from the drop in SwissCom's long position.

The idea behind Telefnica SA and SwissCom AG 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.