Correlation Between Telecom Argentina and Yokohama Rubber

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

Diversification Opportunities for Telecom Argentina and Yokohama Rubber

0.13

Correlation Coefficient

Telecom Argentina  Yokohama Rubber

Average diversification

The 3 months correlation between Telecom and Yokohama is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina SA and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber 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 Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of Telecom Argentina i.e., Telecom Argentina and Yokohama Rubber go up and down completely randomly.

Pair Corralation between Telecom Argentina and Yokohama Rubber

Assuming the 90 days horizon Telecom Argentina SA is expected to generate 1.88 times more return on investment than Yokohama Rubber. However, Telecom Argentina is 1.88 times more volatile than The Yokohama Rubber. It trades about 0.07 of its potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.04 per unit of risk. If you would invest  498.00  in Telecom Argentina SA on October 10, 2024 and sell it today you would earn a total of  832.00  from holding Telecom Argentina SA or generate 167.07% 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.  The Yokohama Rubber

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.

Yokohama Rubber

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Telecom Argentina and Yokohama Rubber

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

The idea behind Telecom Argentina SA and The Yokohama Rubber 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.