Correlation Between Telefonica and Telus Corp

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

Diversification Opportunities for Telefonica and Telus Corp

0.83

Correlation Coefficient

Telefonica  Telus Corp

Very poor diversification

The 3 months correlation between Telefonica and Telus is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Telus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telus Corp 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 Telus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telus Corp has no effect on the direction of Telefonica i.e., Telefonica and Telus Corp go up and down completely randomly.

Pair Corralation between Telefonica and Telus Corp

Considering the 90-day investment horizon Telefonica SA ADR is expected to generate 0.77 times more return on investment than Telus Corp. However, Telefonica SA ADR is 1.3 times less risky than Telus Corp. It trades about 0.24 of its potential returns per unit of risk. Telus Corp is currently generating about 0.13 per unit of risk. If you would invest  405.00  in Telefonica SA ADR on December 19, 2024 and sell it today you would earn a total of  62.00  from holding Telefonica SA ADR or generate 15.31% return on investment over 90 days.

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

Telefonica SA ADR  vs.  Telus Corp

Telefonica SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica SA ADR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Telefonica reported solid returns over the last few months and may actually be approaching a breakup point.

Telus Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telus Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Telus Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Telefonica and Telus Corp

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

The idea behind Telefonica SA ADR and Telus Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.