Correlation Between Telefonica and Grupo Televisa

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

Diversification Opportunities for Telefonica and Grupo Televisa

0.75

Correlation Coefficient

Telefonica  Grupo Televisa

Poor diversification

The 3 months correlation between Telefonica and Grupo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Grupo Televisa SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Televisa SAB 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 Grupo Televisa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Televisa SAB has no effect on the direction of Telefonica i.e., Telefonica and Grupo Televisa go up and down completely randomly.

Pair Corralation between Telefonica and Grupo Televisa

Considering the 90-day investment horizon Telefonica SA ADR is expected to generate 0.43 times more return on investment than Grupo Televisa. However, Telefonica SA ADR is 2.31 times less risky than Grupo Televisa. It trades about 0.51 of its potential returns per unit of risk. Grupo Televisa SAB is currently generating about 0.21 per unit of risk. If you would invest  399.00  in Telefonica SA ADR on November 28, 2024 and sell it today you would earn a total of  47.50  from holding Telefonica SA ADR or generate 11.9% return on investment over 90 days.

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

Telefonica SA ADR  vs.  Grupo Televisa SAB

Telefonica SA ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Telefonica is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Grupo Televisa SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Televisa SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Grupo Televisa is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Telefonica and Grupo Televisa

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

The idea behind Telefonica SA ADR and Grupo Televisa SAB 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.