Correlation Between Airbus Group and Telefonica

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

By analyzing existing cross correlation between Airbus Group SE and Telefonica, you can compare the effects of market volatilities on Airbus Group and Telefonica 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 Airbus Group with a short position of Telefonica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Airbus Group and Telefonica.

Diversification Opportunities for Airbus Group and Telefonica

-0.63

Correlation Coefficient

Airbus Group  Telefonica

Excellent diversification

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

Pair Corralation between Airbus Group and Telefonica

Assuming the 90 days trading horizon Airbus Group SE is expected to generate 1.25 times more return on investment than Telefonica. However, Airbus Group is 1.25 times more volatile than Telefonica. It trades about 0.06 of its potential returns per unit of risk. Telefonica is currently generating about 0.05 per unit of risk. If you would invest  11,334  in Airbus Group SE on October 23, 2024 and sell it today you would earn a total of  5,002  from holding Airbus Group SE or generate 44.13% return on investment over 90 days.

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

Airbus Group SE  vs.  Telefonica

Airbus Group SE

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group SE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Airbus Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Telefonica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonica has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Airbus Group and Telefonica

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

The idea behind Airbus Group SE and Telefonica 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.