Correlation Between Telefonica and U S Cellular

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

Diversification Opportunities for Telefonica and U S Cellular

-0.53

Correlation Coefficient

Telefonica  U S Cellular

Excellent diversification

The 3 months correlation between Telefonica and USM is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular 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 U S Cellular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of Telefonica i.e., Telefonica and U S Cellular go up and down completely randomly.

Pair Corralation between Telefonica and U S Cellular

Considering the 90-day investment horizon Telefonica is expected to generate 7.0 times less return on investment than U S Cellular. But when comparing it to its historical volatility, Telefonica SA ADR is 4.19 times less risky than U S Cellular. It trades about 0.03 of its potential returns per unit of risk. United States Cellular is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,306  in United States Cellular on October 11, 2024 and sell it today you would earn a total of  3,799  from holding United States Cellular or generate 164.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Telefonica SA ADR  vs.  United States Cellular

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

United States Cellular

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, U S Cellular may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Telefonica and U S Cellular

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

The idea behind Telefonica SA ADR and United States Cellular 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.