Correlation Between BBVA Telecomunicacion and ALM Offensif

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

By analyzing existing cross correlation between BBVA Telecomunicaciones PP and ALM Offensif, you can compare the effects of market volatilities on BBVA Telecomunicacion and ALM Offensif 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 BBVA Telecomunicacion with a short position of ALM Offensif. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Telecomunicacion and ALM Offensif.

Diversification Opportunities for BBVA Telecomunicacion and ALM Offensif

0.92

Correlation Coefficient

BBVA Telecomunicacion  ALM Offensif

Almost no diversification

The 3 months correlation between BBVA and ALM is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Telecomunicaciones PP and ALM Offensif in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM Offensif and BBVA Telecomunicacion 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 BBVA Telecomunicaciones PP are associated (or correlated) with ALM Offensif. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM Offensif has no effect on the direction of BBVA Telecomunicacion i.e., BBVA Telecomunicacion and ALM Offensif go up and down completely randomly.

Pair Corralation between BBVA Telecomunicacion and ALM Offensif

Assuming the 90 days trading horizon BBVA Telecomunicaciones PP is expected to generate 2.06 times more return on investment than ALM Offensif. However, BBVA Telecomunicacion is 2.06 times more volatile than ALM Offensif. It trades about 0.18 of its potential returns per unit of risk. ALM Offensif is currently generating about 0.15 per unit of risk. If you would invest  2,709  in BBVA Telecomunicaciones PP on September 23, 2024 and sell it today you would earn a total of  305.00  from holding BBVA Telecomunicaciones PP or generate 11.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

BBVA Telecomunicaciones PP  vs.  ALM Offensif

BBVA Telecomunicaciones

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Telecomunicaciones PP are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady basic indicators, BBVA Telecomunicacion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ALM Offensif

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALM Offensif are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, ALM Offensif is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BBVA Telecomunicacion and ALM Offensif

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

The idea behind BBVA Telecomunicaciones PP and ALM Offensif 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.