Correlation Between Telefonica and Liberty Latin
Can any of the company-specific risk be diversified away by investing in both Telefonica and Liberty Latin 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 Liberty Latin 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 Liberty Latin America, you can compare the effects of market volatilities on Telefonica and Liberty Latin 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 Liberty Latin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Liberty Latin.
Diversification Opportunities for Telefonica and Liberty Latin
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Telefonica and Liberty is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Liberty Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Latin America 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 Liberty Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Latin America has no effect on the direction of Telefonica i.e., Telefonica and Liberty Latin go up and down completely randomly.
Pair Corralation between Telefonica and Liberty Latin
Considering the 90-day investment horizon Telefonica SA ADR is expected to generate 0.36 times more return on investment than Liberty Latin. However, Telefonica SA ADR is 2.8 times less risky than Liberty Latin. It trades about 0.0 of its potential returns per unit of risk. Liberty Latin America is currently generating about -0.11 per unit of risk. If you would invest 406.00 in Telefonica SA ADR on September 26, 2024 and sell it today you would lose (2.00) from holding Telefonica SA ADR or give up 0.49% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Telefonica SA ADR vs. Liberty Latin America
Performance |
Timeline |
Telefonica SA ADR |
Liberty Latin America |
Telefonica and Liberty Latin Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Telefonica and Liberty Latin
The main advantage of trading using opposite Telefonica and Liberty Latin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica position performs unexpectedly, Liberty Latin 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 Liberty Latin will offset losses from the drop in Liberty Latin's long position.Telefonica vs. Orange SA ADR | Telefonica vs. SK Telecom Co | Telefonica vs. America Movil SAB | Telefonica vs. KT Corporation |
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Check out your portfolio center.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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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