Correlation Between Telefonica and Hellenic Telecommunicatio

Can any of the company-specific risk be diversified away by investing in both Telefonica and Hellenic Telecommunicatio 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 Hellenic Telecommunicatio 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 Hellenic Telecommunications Org, you can compare the effects of market volatilities on Telefonica and Hellenic Telecommunicatio 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 Hellenic Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Hellenic Telecommunicatio.

Diversification Opportunities for Telefonica and Hellenic Telecommunicatio

0.84

Correlation Coefficient

Telefonica  Hellenic Telecommunicatio

Very poor diversification

The 3 months correlation between Telefonica and Hellenic is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Hellenic Telecommunications Or in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hellenic Telecommunicatio 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 Hellenic Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hellenic Telecommunicatio has no effect on the direction of Telefonica i.e., Telefonica and Hellenic Telecommunicatio go up and down completely randomly.

Pair Corralation between Telefonica and Hellenic Telecommunicatio

Considering the 90-day investment horizon Telefonica SA ADR is expected to generate 0.46 times more return on investment than Hellenic Telecommunicatio. However, Telefonica SA ADR is 2.16 times less risky than Hellenic Telecommunicatio. It trades about 0.05 of its potential returns per unit of risk. Hellenic Telecommunications Org is currently generating about 0.02 per unit of risk. If you would invest  318.00  in Telefonica SA ADR on September 27, 2024 and sell it today you would earn a total of  86.00  from holding Telefonica SA ADR or generate 27.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Telefonica SA ADR  vs.  Hellenic Telecommunications Or

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 weak 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.

Hellenic Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hellenic Telecommunications Org has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Telefonica and Hellenic Telecommunicatio

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

The idea behind Telefonica SA ADR and Hellenic Telecommunications Org 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.