Correlation Between BBVA Telecomunicacion and Caixabank Seleccin

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

Diversification Opportunities for BBVA Telecomunicacion and Caixabank Seleccin

0.89

Correlation Coefficient

BBVA Telecomunicacion  Caixabank Seleccin

Very poor diversification

The 3 months correlation between BBVA and Caixabank is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Telecomunicaciones PP and Caixabank Seleccin Tendencias in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caixabank Seleccin 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 Caixabank Seleccin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caixabank Seleccin has no effect on the direction of BBVA Telecomunicacion i.e., BBVA Telecomunicacion and Caixabank Seleccin go up and down completely randomly.

Pair Corralation between BBVA Telecomunicacion and Caixabank Seleccin

Assuming the 90 days trading horizon BBVA Telecomunicaciones PP is expected to generate 1.5 times more return on investment than Caixabank Seleccin. However, BBVA Telecomunicacion is 1.5 times more volatile than Caixabank Seleccin Tendencias. It trades about 0.22 of its potential returns per unit of risk. Caixabank Seleccin Tendencias is currently generating about -0.45 per unit of risk. If you would invest  2,972  in BBVA Telecomunicaciones PP on October 1, 2024 and sell it today you would earn a total of  88.00  from holding BBVA Telecomunicaciones PP or generate 2.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.12%
Values	Daily Returns

BBVA Telecomunicaciones PP  vs.  Caixabank Seleccin Tendencias

BBVA Telecomunicaciones

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Telecomunicaciones PP are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady basic indicators, BBVA Telecomunicacion sustained solid returns over the last few months and may actually be approaching a breakup point.

Caixabank Seleccin

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank Seleccin Tendencias are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Caixabank Seleccin 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 Caixabank Seleccin

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

The idea behind BBVA Telecomunicaciones PP and Caixabank Seleccin Tendencias 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.