Correlation Between Telecom Argentina and Cresud SA

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

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

Diversification Opportunities for Telecom Argentina and Cresud SA

0.91

Correlation Coefficient

Telecom Argentina  Cresud SA

Almost no diversification

The 3 months correlation between Telecom and Cresud is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina and Cresud SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresud SA 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 Cresud SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cresud SA has no effect on the direction of Telecom Argentina i.e., Telecom Argentina and Cresud SA go up and down completely randomly.

Pair Corralation between Telecom Argentina and Cresud SA

Assuming the 90 days trading horizon Telecom Argentina is expected to generate 1.33 times more return on investment than Cresud SA. However, Telecom Argentina is 1.33 times more volatile than Cresud SA. It trades about 0.2 of its potential returns per unit of risk. Cresud SA is currently generating about 0.19 per unit of risk. If you would invest  201,500  in Telecom Argentina on October 25, 2024 and sell it today you would earn a total of  106,000  from holding Telecom Argentina or generate 52.61% return on investment over 90 days.

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

Telecom Argentina  vs.  Cresud SA

Telecom Argentina

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Telecom Argentina sustained solid returns over the last few months and may actually be approaching a breakup point.

Cresud SA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cresud SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cresud SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecom Argentina and Cresud SA

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

The idea behind Telecom Argentina and Cresud 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.