Correlation Between Telecom Argentina and Consultatio

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

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

Diversification Opportunities for Telecom Argentina and Consultatio

0.81

Correlation Coefficient

Telecom Argentina  Consultatio

Very poor diversification

The 3 months correlation between Telecom and Consultatio is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina and Consultatio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consultatio 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 Consultatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consultatio SA has no effect on the direction of Telecom Argentina i.e., Telecom Argentina and Consultatio go up and down completely randomly.

Pair Corralation between Telecom Argentina and Consultatio

Assuming the 90 days trading horizon Telecom Argentina is expected to generate 1.67 times more return on investment than Consultatio. However, Telecom Argentina is 1.67 times more volatile than Consultatio SA. It trades about -0.04 of its potential returns per unit of risk. Consultatio SA is currently generating about -0.2 per unit of risk. If you would invest  307,000  in Telecom Argentina on December 30, 2024 and sell it today you would lose (34,500) from holding Telecom Argentina or give up 11.24% of portfolio value over 90 days.

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

Telecom Argentina  vs.  Consultatio SA

Telecom Argentina

Risk-Adjusted Performance

Very Weak

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

Consultatio SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consultatio SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Telecom Argentina and Consultatio

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

The idea behind Telecom Argentina and Consultatio 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.