Correlation Between Telefnica and America Movil

Can any of the company-specific risk be diversified away by investing in both Telefnica and America Movil 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 Telefnica and America Movil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Telefnica SA and America Movil SAB, you can compare the effects of market volatilities on Telefnica and America Movil 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 Telefnica with a short position of America Movil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefnica and America Movil.

Diversification Opportunities for Telefnica and America Movil

0.3

Correlation Coefficient

Telefnica  America Movil

Weak diversification

The 3 months correlation between Telefnica and America is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica SA and America Movil SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on America Movil SAB and Telefnica 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 Telefnica SA are associated (or correlated) with America Movil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of America Movil SAB has no effect on the direction of Telefnica i.e., Telefnica and America Movil go up and down completely randomly.

Pair Corralation between Telefnica and America Movil

Assuming the 90 days horizon Telefnica SA is expected to under-perform the America Movil. In addition to that, Telefnica is 2.71 times more volatile than America Movil SAB. It trades about -0.08 of its total potential returns per unit of risk. America Movil SAB is currently generating about -0.08 per unit of volatility. If you would invest  1,405  in America Movil SAB on October 24, 2024 and sell it today you would lose (38.00) from holding America Movil SAB or give up 2.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Telefnica SA  vs.  America Movil SAB

Telefnica SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefnica SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic 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.

America Movil SAB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Telefnica and America Movil

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

The idea behind Telefnica SA and America Movil 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.