Correlation Between Telecom Argentina and Banco Patagonia

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

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

Diversification Opportunities for Telecom Argentina and Banco Patagonia

0.85

Correlation Coefficient

Telecom Argentina  Banco Patagonia

Very poor diversification

The 3 months correlation between Telecom and Banco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina and Banco Patagonia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Patagonia and Telecom Argentina 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 Telecom Argentina are associated (or correlated) with Banco Patagonia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Patagonia has no effect on the direction of Telecom Argentina i.e., Telecom Argentina and Banco Patagonia go up and down completely randomly.

Pair Corralation between Telecom Argentina and Banco Patagonia

Assuming the 90 days trading horizon Telecom Argentina is expected to generate 0.87 times more return on investment than Banco Patagonia. However, Telecom Argentina is 1.14 times less risky than Banco Patagonia. It trades about 0.02 of its potential returns per unit of risk. Banco Patagonia is currently generating about -0.04 per unit of risk. If you would invest  285,500  in Telecom Argentina on December 22, 2024 and sell it today you would earn a total of  3,500  from holding Telecom Argentina or generate 1.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Telecom Argentina  vs.  Banco Patagonia

Telecom Argentina

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Telecom Argentina is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Banco Patagonia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Banco Patagonia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Telecom Argentina and Banco Patagonia

The main advantage of trading using opposite Telecom Argentina and Banco Patagonia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Argentina position performs unexpectedly, Banco Patagonia 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 Banco Patagonia will offset losses from the drop in Banco Patagonia's long position.

The idea behind Telecom Argentina and Banco Patagonia 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.