Correlation Between Metrovacesa and Telefonica

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

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

Diversification Opportunities for Metrovacesa and Telefonica

-0.22

Correlation Coefficient

Metrovacesa  Telefonica

Very good diversification

The 3 months correlation between Metrovacesa and Telefonica is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Metrovacesa SA and Telefonica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica and Metrovacesa 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 Metrovacesa 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 Metrovacesa i.e., Metrovacesa and Telefonica go up and down completely randomly.

Pair Corralation between Metrovacesa and Telefonica

Assuming the 90 days trading horizon Metrovacesa SA is expected to generate 1.08 times more return on investment than Telefonica. However, Metrovacesa is 1.08 times more volatile than Telefonica. It trades about 0.12 of its potential returns per unit of risk. Telefonica is currently generating about 0.02 per unit of risk. If you would invest  844.00  in Metrovacesa SA on September 13, 2024 and sell it today you would earn a total of  63.00  from holding Metrovacesa SA or generate 7.46% return on investment over 90 days.

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

Metrovacesa SA  vs.  Telefonica

Metrovacesa SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metrovacesa SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Metrovacesa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Telefonica

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Telefonica is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Metrovacesa and Telefonica

The main advantage of trading using opposite Metrovacesa and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metrovacesa 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 Metrovacesa 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 Commodity Directory module to find actively traded commodities issued by global exchanges.