Correlation Between TELEFONICA and Esperion Therapeutics

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

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

Diversification Opportunities for TELEFONICA and Esperion Therapeutics

-0.77

Correlation Coefficient

TELEFONICA  Esperion Therapeutics

Pay attention - limited upside

The 3 months correlation between TELEFONICA and Esperion is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding TELEFONICA EUROPE B and Esperion Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esperion Therapeutics and TELEFONICA 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 TELEFONICA EUROPE B are associated (or correlated) with Esperion Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esperion Therapeutics has no effect on the direction of TELEFONICA i.e., TELEFONICA and Esperion Therapeutics go up and down completely randomly.

Pair Corralation between TELEFONICA and Esperion Therapeutics

Assuming the 90 days trading horizon TELEFONICA EUROPE B is expected to under-perform the Esperion Therapeutics. But the bond apears to be less risky and, when comparing its historical volatility, TELEFONICA EUROPE B is 9.95 times less risky than Esperion Therapeutics. The bond trades about -0.15 of its potential returns per unit of risk. The Esperion Therapeutics is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  182.00  in Esperion Therapeutics on September 4, 2024 and sell it today you would earn a total of  128.00  from holding Esperion Therapeutics or generate 70.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

TELEFONICA EUROPE B  vs.  Esperion Therapeutics

TELEFONICA EUROPE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELEFONICA EUROPE B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TELEFONICA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Esperion Therapeutics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Esperion Therapeutics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Esperion Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TELEFONICA and Esperion Therapeutics

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

The idea behind TELEFONICA EUROPE B and Esperion Therapeutics 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.