Correlation Between T Mobile and Telefonica

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

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

Diversification Opportunities for T Mobile and Telefonica

0.83

Correlation Coefficient

T Mobile  Telefonica

Very poor diversification

The 3 months correlation between TMUS and Telefonica is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and Telefonica SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica SA ADR and T Mobile 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 T Mobile are associated (or correlated) with Telefonica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica SA ADR has no effect on the direction of T Mobile i.e., T Mobile and Telefonica go up and down completely randomly.

Pair Corralation between T Mobile and Telefonica

Given the investment horizon of 90 days T Mobile is expected to generate 1.65 times more return on investment than Telefonica. However, T Mobile is 1.65 times more volatile than Telefonica SA ADR. It trades about 0.19 of its potential returns per unit of risk. Telefonica SA ADR is currently generating about 0.22 per unit of risk. If you would invest  21,992  in T Mobile on December 29, 2024 and sell it today you would earn a total of  4,501  from holding T Mobile or generate 20.47% return on investment over 90 days.

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

T Mobile  vs.  Telefonica SA ADR

T Mobile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, T Mobile unveiled solid returns over the last few months and may actually be approaching a breakup point.

Telefonica SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica SA ADR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Telefonica reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T Mobile and Telefonica

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

The idea behind T Mobile and Telefonica SA 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.