Correlation Between Telecom Argentina and Gold Fields

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

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

Diversification Opportunities for Telecom Argentina and Gold Fields

-0.69

Correlation Coefficient

Telecom Argentina  Gold Fields

Excellent diversification

The 3 months correlation between Telecom and Gold is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina and Gold Fields Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields 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 Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of Telecom Argentina i.e., Telecom Argentina and Gold Fields go up and down completely randomly.

Pair Corralation between Telecom Argentina and Gold Fields

Assuming the 90 days trading horizon Telecom Argentina is expected to under-perform the Gold Fields. In addition to that, Telecom Argentina is 1.05 times more volatile than Gold Fields Ltd. It trades about -0.05 of its total potential returns per unit of risk. Gold Fields Ltd is currently generating about 0.33 per unit of volatility. If you would invest  1,562,500  in Gold Fields Ltd on December 29, 2024 and sell it today you would earn a total of  1,292,500  from holding Gold Fields Ltd or generate 82.72% return on investment over 90 days.

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

Telecom Argentina  vs.  Gold Fields Ltd

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.

Gold Fields

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Gold Fields sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecom Argentina and Gold Fields

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

The idea behind Telecom Argentina and Gold Fields Ltd 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.