Correlation Between Telefnica and Livetech

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

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

Diversification Opportunities for Telefnica and Livetech

0.0

Correlation Coefficient

Telefnica  Livetech

Pay attention - limited upside

The 3 months correlation between Telefnica and Livetech is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica SA and Livetech da Bahia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livetech da Bahia 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 Livetech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livetech da Bahia has no effect on the direction of Telefnica i.e., Telefnica and Livetech go up and down completely randomly.

Pair Corralation between Telefnica and Livetech

Assuming the 90 days trading horizon Telefnica SA is expected to generate 1.2 times more return on investment than Livetech. However, Telefnica is 1.2 times more volatile than Livetech da Bahia. It trades about -0.01 of its potential returns per unit of risk. Livetech da Bahia is currently generating about -0.4 per unit of risk. If you would invest  2,574  in Telefnica SA on September 27, 2024 and sell it today you would lose (66.00) from holding Telefnica SA or give up 2.56% of portfolio value over 90 days.

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

Telefnica SA  vs.  Livetech da Bahia

Telefnica SA

Risk-Adjusted Performance

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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.

Livetech da Bahia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Livetech da Bahia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Telefnica and Livetech

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

The idea behind Telefnica SA and Livetech da Bahia 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.