Correlation Between North American and Telecom Argentina

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

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

Diversification Opportunities for North American and Telecom Argentina

0.86

Correlation Coefficient

North American  Telecom Argentina

Very poor diversification

The 3 months correlation between North and Telecom is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Telecom Argentina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Argentina and North American 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 North American Construction 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 North American i.e., North American and Telecom Argentina go up and down completely randomly.

Pair Corralation between North American and Telecom Argentina

Assuming the 90 days horizon North American is expected to generate 1.83 times less return on investment than Telecom Argentina. But when comparing it to its historical volatility, North American Construction is 1.31 times less risky than Telecom Argentina. It trades about 0.05 of its potential returns per unit of risk. Telecom Argentina SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  498.00  in Telecom Argentina SA on October 10, 2024 and sell it today you would earn a total of  832.00  from holding Telecom Argentina SA or generate 167.07% return on investment over 90 days.

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

North American Construction  vs.  Telecom Argentina SA

North American Const

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, North American reported solid returns over the last few months and may actually be approaching a breakup point.

Telecom Argentina

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina SA are ranked lower than 21 (%) 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 North American and Telecom Argentina

The main advantage of trading using opposite North American and Telecom Argentina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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 North American Construction 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.