Correlation Between Telefonica and Parlem Telecom

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

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

Diversification Opportunities for Telefonica and Parlem Telecom

-0.24

Correlation Coefficient

Telefonica  Parlem Telecom

Very good diversification

The 3 months correlation between Telefonica and Parlem is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica and Parlem Telecom Companyia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parlem Telecom ia 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 Parlem Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parlem Telecom ia has no effect on the direction of Telefonica i.e., Telefonica and Parlem Telecom go up and down completely randomly.

Pair Corralation between Telefonica and Parlem Telecom

Assuming the 90 days trading horizon Telefonica is expected to generate 0.48 times more return on investment than Parlem Telecom. However, Telefonica is 2.09 times less risky than Parlem Telecom. It trades about 0.05 of its potential returns per unit of risk. Parlem Telecom Companyia is currently generating about 0.01 per unit of risk. If you would invest  419.00  in Telefonica on December 2, 2024 and sell it today you would earn a total of  11.00  from holding Telefonica or generate 2.63% return on investment over 90 days.

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

Telefonica  vs.  Parlem Telecom Companyia

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.

Parlem Telecom ia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parlem Telecom Companyia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Parlem Telecom is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Telefonica and Parlem Telecom

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

The idea behind Telefonica and Parlem Telecom Companyia 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 Stocks Directory module to find actively traded stocks across global markets.