Correlation Between Telecom Argentina and Compania

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

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

Diversification Opportunities for Telecom Argentina and Compania

0.87

Correlation Coefficient

Telecom Argentina  Compania

Very poor diversification

The 3 months correlation between Telecom and Compania is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte 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 Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of Telecom Argentina i.e., Telecom Argentina and Compania go up and down completely randomly.

Pair Corralation between Telecom Argentina and Compania

Assuming the 90 days trading horizon Telecom Argentina is expected to generate 1.29 times more return on investment than Compania. However, Telecom Argentina is 1.29 times more volatile than Compania de Transporte. It trades about 0.25 of its potential returns per unit of risk. Compania de Transporte is currently generating about 0.15 per unit of risk. If you would invest  182,000  in Telecom Argentina on September 1, 2024 and sell it today you would earn a total of  122,500  from holding Telecom Argentina or generate 67.31% return on investment over 90 days.

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

Telecom Argentina  vs.  Compania de Transporte

Telecom Argentina

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina are ranked lower than 19 (%) 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.

Compania de Transporte

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecom Argentina and Compania

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

The idea behind Telecom Argentina and Compania de Transporte 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.