Correlation Between Parlem Telecom and Telefonica

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

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

Diversification Opportunities for Parlem Telecom and Telefonica

-0.41

Correlation Coefficient

Parlem Telecom  Telefonica

Very good diversification

The 3 months correlation between Parlem and Telefonica is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Parlem Telecom Companyia and Telefonica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica and Parlem Telecom 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 Parlem Telecom Companyia 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 Parlem Telecom i.e., Parlem Telecom and Telefonica go up and down completely randomly.

Pair Corralation between Parlem Telecom and Telefonica

Assuming the 90 days trading horizon Parlem Telecom Companyia is expected to under-perform the Telefonica. In addition to that, Parlem Telecom is 1.87 times more volatile than Telefonica. It trades about -0.01 of its total potential returns per unit of risk. Telefonica is currently generating about 0.13 per unit of volatility. If you would invest  391.00  in Telefonica on December 24, 2024 and sell it today you would earn a total of  35.00  from holding Telefonica or generate 8.95% return on investment over 90 days.

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

Parlem Telecom Companyia  vs.  Telefonica

Parlem Telecom ia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parlem Telecom Companyia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Parlem Telecom is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Telefonica

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Telefonica may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Parlem Telecom and Telefonica

The main advantage of trading using opposite Parlem Telecom and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parlem Telecom 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 Parlem Telecom Companyia 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.