Correlation Between Jefferies Financial and Telefnica

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

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

Diversification Opportunities for Jefferies Financial and Telefnica

-0.23

Correlation Coefficient

Jefferies Financial  Telefnica

Very good diversification

The 3 months correlation between Jefferies and Telefnica is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Jefferies Financial Group and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA and Jefferies Financial 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 Jefferies Financial Group are associated (or correlated) with Telefnica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica SA has no effect on the direction of Jefferies Financial i.e., Jefferies Financial and Telefnica go up and down completely randomly.

Pair Corralation between Jefferies Financial and Telefnica

Assuming the 90 days trading horizon Jefferies Financial Group is expected to generate 1.15 times more return on investment than Telefnica. However, Jefferies Financial is 1.15 times more volatile than Telefnica SA. It trades about 0.14 of its potential returns per unit of risk. Telefnica SA is currently generating about -0.03 per unit of risk. If you would invest  37,055  in Jefferies Financial Group on October 23, 2024 and sell it today you would earn a total of  9,005  from holding Jefferies Financial Group or generate 24.3% return on investment over 90 days.

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

Jefferies Financial Group  vs.  Telefnica SA

Jefferies Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jefferies Financial Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Jefferies Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Telefnica SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefnica SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Telefnica is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jefferies Financial and Telefnica

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

The idea behind Jefferies Financial Group and Telefnica 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..