Correlation Between Hospital Mater and Telefnica

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

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

Diversification Opportunities for Hospital Mater and Telefnica

-0.01

Correlation Coefficient

Hospital Mater  Telefnica

Good diversification

The 3 months correlation between Hospital and Telefnica is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hospital Mater Dei and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA and Hospital Mater 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 Hospital Mater Dei 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 Hospital Mater i.e., Hospital Mater and Telefnica go up and down completely randomly.

Pair Corralation between Hospital Mater and Telefnica

Assuming the 90 days trading horizon Hospital Mater Dei is expected to under-perform the Telefnica. In addition to that, Hospital Mater is 1.15 times more volatile than Telefnica SA. It trades about -0.32 of its total potential returns per unit of risk. Telefnica SA is currently generating about -0.08 per unit of volatility. If you would invest  2,609  in Telefnica SA on October 5, 2024 and sell it today you would lose (93.00) from holding Telefnica SA or give up 3.56% of portfolio value over 90 days.

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

Hospital Mater Dei  vs.  Telefnica SA

Hospital Mater Dei

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hospital Mater Dei has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Telefnica SA

Risk-Adjusted Performance

0 of 100

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 Hospital Mater and Telefnica

The main advantage of trading using opposite Hospital Mater and Telefnica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hospital Mater 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 Hospital Mater Dei 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.