Correlation Between Ecotel Communication and Telecom Argentina

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

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

Diversification Opportunities for Ecotel Communication and Telecom Argentina

0.28

Correlation Coefficient

Ecotel Communication  Telecom Argentina

Modest diversification

The 3 months correlation between Ecotel and Telecom is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ecotel communication ag and Telecom Argentina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Argentina and Ecotel Communication 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 ecotel communication ag 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 Ecotel Communication i.e., Ecotel Communication and Telecom Argentina go up and down completely randomly.

Pair Corralation between Ecotel Communication and Telecom Argentina

Assuming the 90 days trading horizon ecotel communication ag is expected to under-perform the Telecom Argentina. But the stock apears to be less risky and, when comparing its historical volatility, ecotel communication ag is 1.3 times less risky than Telecom Argentina. The stock trades about -0.02 of its potential returns per unit of risk. The Telecom Argentina SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  526.00  in Telecom Argentina SA on October 25, 2024 and sell it today you would earn a total of  664.00  from holding Telecom Argentina SA or generate 126.24% return on investment over 90 days.

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

ecotel communication ag  vs.  Telecom Argentina SA

ecotel communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ecotel communication ag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Ecotel Communication is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Telecom Argentina

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Ecotel Communication and Telecom Argentina

The main advantage of trading using opposite Ecotel Communication and Telecom Argentina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecotel Communication 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 ecotel communication ag and Telecom Argentina SA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.