Correlation Between Telefonica and Grab Holdings

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

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

Diversification Opportunities for Telefonica and Grab Holdings

-0.76

Correlation Coefficient

Telefonica  Grab Holdings

Pay attention - limited upside

The 3 months correlation between Telefonica and Grab is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Grab Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grab Holdings 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 SA ADR are associated (or correlated) with Grab Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grab Holdings has no effect on the direction of Telefonica i.e., Telefonica and Grab Holdings go up and down completely randomly.

Pair Corralation between Telefonica and Grab Holdings

Considering the 90-day investment horizon Telefonica SA ADR is expected to under-perform the Grab Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Telefonica SA ADR is 2.22 times less risky than Grab Holdings. The stock trades about -0.31 of its potential returns per unit of risk. The Grab Holdings is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  515.00  in Grab Holdings on September 27, 2024 and sell it today you would lose (19.00) from holding Grab Holdings or give up 3.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Telefonica SA ADR  vs.  Grab Holdings

Telefonica SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonica SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Grab Holdings

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Telefonica and Grab Holdings

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

The idea behind Telefonica SA ADR and Grab Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.