Correlation Between Telecom Argentina and Adidas AG

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

By analyzing existing cross correlation between Telecom Argentina SA and adidas AG, you can compare the effects of market volatilities on Telecom Argentina and Adidas AG 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 Telecom Argentina with a short position of Adidas AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Argentina and Adidas AG.

Diversification Opportunities for Telecom Argentina and Adidas AG

0.06

Correlation Coefficient

Telecom Argentina  Adidas AG

Significant diversification

The 3 months correlation between Telecom and Adidas is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina SA and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG and Telecom Argentina 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 Telecom Argentina SA are associated (or correlated) with Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Telecom Argentina i.e., Telecom Argentina and Adidas AG go up and down completely randomly.

Pair Corralation between Telecom Argentina and Adidas AG

Assuming the 90 days horizon Telecom Argentina SA is expected to generate 2.43 times more return on investment than Adidas AG. However, Telecom Argentina is 2.43 times more volatile than adidas AG. It trades about 0.27 of its potential returns per unit of risk. adidas AG is currently generating about 0.01 per unit of risk. If you would invest  691.00  in Telecom Argentina SA on October 10, 2024 and sell it today you would earn a total of  639.00  from holding Telecom Argentina SA or generate 92.47% return on investment over 90 days.

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

Telecom Argentina SA  vs.  adidas AG

Telecom Argentina

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Telecom Argentina reported solid returns over the last few months and may actually be approaching a breakup point.

adidas AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days adidas AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Adidas AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Telecom Argentina and Adidas AG

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

The idea behind Telecom Argentina SA and adidas AG 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.