Correlation Between Capex SA and Telecom Argentina

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

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

Diversification Opportunities for Capex SA and Telecom Argentina

0.66

Correlation Coefficient

Capex SA  Telecom Argentina

Poor diversification

The 3 months correlation between Capex and Telecom is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Capex SA and Telecom Argentina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Argentina and Capex SA 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 Capex SA are associated (or correlated) with Telecom Argentina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Argentina has no effect on the direction of Capex SA i.e., Capex SA and Telecom Argentina go up and down completely randomly.

Pair Corralation between Capex SA and Telecom Argentina

Assuming the 90 days trading horizon Capex SA is expected to generate 1.17 times less return on investment than Telecom Argentina. But when comparing it to its historical volatility, Capex SA is 1.11 times less risky than Telecom Argentina. It trades about 0.21 of its potential returns per unit of risk. Telecom Argentina is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  194,500  in Telecom Argentina on September 4, 2024 and sell it today you would earn a total of  106,500  from holding Telecom Argentina or generate 54.76% return on investment over 90 days.

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

Capex SA  vs.  Telecom Argentina

Capex SA

Risk-Adjusted Performance

16 of 100

Solid

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

Telecom Argentina

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Telecom Argentina sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capex SA and Telecom Argentina

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

The idea behind Capex SA and Telecom Argentina 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.