Correlation Between Swedbank Robur and BBVA Telecomunicacion

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

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

Diversification Opportunities for Swedbank Robur and BBVA Telecomunicacion

0.85

Correlation Coefficient

Swedbank Robur  BBVA Telecomunicacion

Very poor diversification

The 3 months correlation between Swedbank and BBVA is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank Robur Corporate and BBVA Telecomunicaciones PP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Telecomunicaciones and Swedbank Robur 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 Swedbank Robur Corporate are associated (or correlated) with BBVA Telecomunicacion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Telecomunicaciones has no effect on the direction of Swedbank Robur i.e., Swedbank Robur and BBVA Telecomunicacion go up and down completely randomly.

Pair Corralation between Swedbank Robur and BBVA Telecomunicacion

Assuming the 90 days trading horizon Swedbank Robur is expected to generate 7.18 times less return on investment than BBVA Telecomunicacion. But when comparing it to its historical volatility, Swedbank Robur Corporate is 5.47 times less risky than BBVA Telecomunicacion. It trades about 0.14 of its potential returns per unit of risk. BBVA Telecomunicaciones PP is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,709  in BBVA Telecomunicaciones PP on September 22, 2024 and sell it today you would earn a total of  311.00  from holding BBVA Telecomunicaciones PP or generate 11.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Swedbank Robur Corporate  vs.  BBVA Telecomunicaciones PP

Swedbank Robur Corporate

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank Robur Corporate are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Swedbank Robur is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Swedbank Robur and BBVA Telecomunicacion

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

The idea behind Swedbank Robur Corporate and BBVA Telecomunicaciones PP 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.