Correlation Between T Mobile and Telefnica

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

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

Diversification Opportunities for T Mobile and Telefnica

0.0

Correlation Coefficient

T Mobile  Telefnica

Pay attention - limited upside

The 3 months correlation between T1MU34 and Telefnica is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA and T Mobile 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 T Mobile 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 T Mobile i.e., T Mobile and Telefnica go up and down completely randomly.

Pair Corralation between T Mobile and Telefnica

Assuming the 90 days trading horizon T Mobile is expected to under-perform the Telefnica. But the stock apears to be less risky and, when comparing its historical volatility, T Mobile is 1.37 times less risky than Telefnica. The stock trades about -0.06 of its potential returns per unit of risk. The Telefnica SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,536  in Telefnica SA on September 23, 2024 and sell it today you would lose (46.00) from holding Telefnica SA or give up 1.81% of portfolio value over 90 days.

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

T Mobile  vs.  Telefnica SA

T Mobile

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, T Mobile 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 T Mobile and Telefnica

The main advantage of trading using opposite T Mobile and Telefnica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Mobile 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 T Mobile 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.