Correlation Between TELEFONICA and Teleflex Incorporated

Can any of the company-specific risk be diversified away by investing in both TELEFONICA and Teleflex Incorporated 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 Teleflex Incorporated 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 Teleflex Incorporated, you can compare the effects of market volatilities on TELEFONICA and Teleflex Incorporated 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 Teleflex Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of TELEFONICA and Teleflex Incorporated.

Diversification Opportunities for TELEFONICA and Teleflex Incorporated

0.63

Correlation Coefficient

TELEFONICA  Teleflex Incorporated

Poor diversification

The 3 months correlation between TELEFONICA and Teleflex is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding TELEFONICA EUROPE B and Teleflex Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teleflex Incorporated 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 Teleflex Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teleflex Incorporated has no effect on the direction of TELEFONICA i.e., TELEFONICA and Teleflex Incorporated go up and down completely randomly.

Pair Corralation between TELEFONICA and Teleflex Incorporated

Assuming the 90 days trading horizon TELEFONICA EUROPE B is expected to generate 0.19 times more return on investment than Teleflex Incorporated. However, TELEFONICA EUROPE B is 5.19 times less risky than Teleflex Incorporated. It trades about -0.17 of its potential returns per unit of risk. Teleflex Incorporated is currently generating about -0.19 per unit of risk. If you would invest  11,830  in TELEFONICA EUROPE B on September 13, 2024 and sell it today you would lose (548.00) from holding TELEFONICA EUROPE B or give up 4.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

TELEFONICA EUROPE B  vs.  Teleflex Incorporated

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Teleflex Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teleflex Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with TELEFONICA and Teleflex Incorporated

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

The idea behind TELEFONICA EUROPE B and Teleflex Incorporated 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.