Correlation Between Commcenter and Telefonica

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

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

Diversification Opportunities for Commcenter and Telefonica

0.67

Correlation Coefficient

Commcenter  Telefonica

Poor diversification

The 3 months correlation between Commcenter and Telefonica is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Commcenter SA and Telefonica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica and Commcenter 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 Commcenter SA 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 Commcenter i.e., Commcenter and Telefonica go up and down completely randomly.

Pair Corralation between Commcenter and Telefonica

Assuming the 90 days trading horizon Commcenter is expected to generate 7.84 times less return on investment than Telefonica. But when comparing it to its historical volatility, Commcenter SA is 2.22 times less risky than Telefonica. It trades about 0.02 of its potential returns per unit of risk. Telefonica is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  351.00  in Telefonica on October 7, 2024 and sell it today you would earn a total of  46.00  from holding Telefonica or generate 13.11% return on investment over 90 days.

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

Commcenter SA  vs.  Telefonica

Commcenter SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commcenter SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Commcenter is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Commcenter and Telefonica

The main advantage of trading using opposite Commcenter and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commcenter 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 Commcenter SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..