Correlation Between Telefonica and ACS Actividades

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

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

Diversification Opportunities for Telefonica and ACS Actividades

0.04

Correlation Coefficient

Telefonica  ACS Actividades

Significant diversification

The 3 months correlation between Telefonica and ACS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica and ACS Actividades de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACS Actividades de and Telefonica 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 Telefonica are associated (or correlated) with ACS Actividades. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACS Actividades de has no effect on the direction of Telefonica i.e., Telefonica and ACS Actividades go up and down completely randomly.

Pair Corralation between Telefonica and ACS Actividades

Assuming the 90 days trading horizon Telefonica is expected to generate 0.74 times more return on investment than ACS Actividades. However, Telefonica is 1.35 times less risky than ACS Actividades. It trades about 0.17 of its potential returns per unit of risk. ACS Actividades de is currently generating about 0.12 per unit of risk. If you would invest  399.00  in Telefonica on December 2, 2024 and sell it today you would earn a total of  31.00  from holding Telefonica or generate 7.77% return on investment over 90 days.

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

Telefonica  vs.  ACS Actividades de

Telefonica

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Telefonica is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ACS Actividades de

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ACS Actividades de are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ACS Actividades exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonica and ACS Actividades

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

The idea behind Telefonica and ACS Actividades de 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.