Correlation Between Telecom Argentina and Telenor ASA

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

Diversification Opportunities for Telecom Argentina and Telenor ASA

-0.77

Correlation Coefficient

Telecom Argentina  Telenor ASA

Pay attention - limited upside

The 3 months correlation between Telecom and Telenor is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina SA and Telenor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA ADR 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 Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA ADR has no effect on the direction of Telecom Argentina i.e., Telecom Argentina and Telenor ASA go up and down completely randomly.

Pair Corralation between Telecom Argentina and Telenor ASA

Considering the 90-day investment horizon Telecom Argentina SA is expected to under-perform the Telenor ASA. In addition to that, Telecom Argentina is 3.72 times more volatile than Telenor ASA ADR. It trades about -0.02 of its total potential returns per unit of risk. Telenor ASA ADR is currently generating about 0.41 per unit of volatility. If you would invest  1,096  in Telenor ASA ADR on December 20, 2024 and sell it today you would earn a total of  308.00  from holding Telenor ASA ADR or generate 28.1% return on investment over 90 days.

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

Telecom Argentina SA  vs.  Telenor ASA ADR

Telecom Argentina

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telecom Argentina SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Telecom Argentina is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Telenor ASA ADR

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Telenor ASA ADR are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Telenor ASA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecom Argentina and Telenor ASA

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

The idea behind Telecom Argentina SA and Telenor ASA ADR 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.