Correlation Between Telefnica and Cable One

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

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

Diversification Opportunities for Telefnica and Cable One

-0.1

Correlation Coefficient

Telefnica  Cable One

Good diversification

The 3 months correlation between Telefnica and Cable is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica SA and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One 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 Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of Telefnica i.e., Telefnica and Cable One go up and down completely randomly.

Pair Corralation between Telefnica and Cable One

Assuming the 90 days trading horizon Telefnica SA is expected to under-perform the Cable One. But the stock apears to be less risky and, when comparing its historical volatility, Telefnica SA is 1.01 times less risky than Cable One. The stock trades about -0.01 of its potential returns per unit of risk. The Cable One is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  932.00  in Cable One on September 26, 2024 and sell it today you would earn a total of  223.00  from holding Cable One or generate 23.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Telefnica SA  vs.  Cable One

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 somewhat strong basic indicators, Telefnica is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cable One

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cable One sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefnica and Cable One

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

The idea behind Telefnica SA and Cable One 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.