Correlation Between Telefonica and Duro Felguera

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

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

Diversification Opportunities for Telefonica and Duro Felguera

-0.49

Correlation Coefficient

Telefonica  Duro Felguera

Very good diversification

The 3 months correlation between Telefonica and Duro is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica and Duro Felguera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duro Felguera 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 Duro Felguera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duro Felguera has no effect on the direction of Telefonica i.e., Telefonica and Duro Felguera go up and down completely randomly.

Pair Corralation between Telefonica and Duro Felguera

Assuming the 90 days trading horizon Telefonica is expected to generate 2.71 times less return on investment than Duro Felguera. But when comparing it to its historical volatility, Telefonica is 7.32 times less risky than Duro Felguera. It trades about 0.04 of its potential returns per unit of risk. Duro Felguera is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Duro Felguera on September 5, 2024 and sell it today you would lose (3.00) from holding Duro Felguera or give up 5.66% of portfolio value over 90 days.

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

Telefonica  vs.  Duro Felguera

Telefonica

Risk-Adjusted Performance

3 of 100

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.

Duro Felguera

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Duro Felguera are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Duro Felguera may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Telefonica and Duro Felguera

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

The idea behind Telefonica and Duro Felguera 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.