Correlation Between Telefonica and Energy Solar

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

By analyzing existing cross correlation between Telefonica and Energy Solar Tech, you can compare the effects of market volatilities on Telefonica and Energy Solar 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 Energy Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Energy Solar.

Diversification Opportunities for Telefonica and Energy Solar

0.55

Correlation Coefficient

Telefonica  Energy Solar

Very weak diversification

The 3 months correlation between Telefonica and Energy is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica and Energy Solar Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Solar Tech 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 Energy Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Solar Tech has no effect on the direction of Telefonica i.e., Telefonica and Energy Solar go up and down completely randomly.

Pair Corralation between Telefonica and Energy Solar

Assuming the 90 days trading horizon Telefonica is expected to generate 0.42 times more return on investment than Energy Solar. However, Telefonica is 2.37 times less risky than Energy Solar. It trades about 0.03 of its potential returns per unit of risk. Energy Solar Tech is currently generating about -0.06 per unit of risk. If you would invest  420.00  in Telefonica on December 3, 2024 and sell it today you would earn a total of  7.00  from holding Telefonica or generate 1.67% return on investment over 90 days.

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

Telefonica  vs.  Energy Solar Tech

Telefonica

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica are ranked lower than 2 (%) 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.

Energy Solar Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Solar Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Telefonica and Energy Solar

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

The idea behind Telefonica and Energy Solar Tech 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.