Correlation Between Telefnica and T Mobile

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

By analyzing existing cross correlation between Telefnica SA and T Mobile, you can compare the effects of market volatilities on Telefnica and T Mobile 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 T Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefnica and T Mobile.

Diversification Opportunities for Telefnica and T Mobile

0.0

Correlation Coefficient

Telefnica  T Mobile

Pay attention - limited upside

The 3 months correlation between Telefnica and T1MU34 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica SA and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile 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 T Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Mobile has no effect on the direction of Telefnica i.e., Telefnica and T Mobile go up and down completely randomly.

Pair Corralation between Telefnica and T Mobile

Assuming the 90 days trading horizon Telefnica SA is expected to generate 1.37 times more return on investment than T Mobile. However, Telefnica is 1.37 times more volatile than T Mobile. It trades about -0.01 of its potential returns per unit of risk. T Mobile is currently generating about -0.06 per unit of risk. If you would invest  2,536  in Telefnica SA on September 23, 2024 and sell it today you would lose (46.00) from holding Telefnica SA or give up 1.81% of portfolio value over 90 days.

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

Telefnica SA  vs.  T Mobile

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 somewhat strong basic indicators, Telefnica is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

T Mobile

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, T Mobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefnica and T Mobile

The main advantage of trading using opposite Telefnica and T Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefnica position performs unexpectedly, T Mobile 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 T Mobile will offset losses from the drop in T Mobile's long position.

The idea behind Telefnica SA and T Mobile 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.