Correlation Between VEON and Telefonica

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

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

Diversification Opportunities for VEON and Telefonica

-0.57

Correlation Coefficient

VEON  Telefonica

Excellent diversification

The 3 months correlation between VEON and Telefonica is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding VEON 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 VEON 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 VEON 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 VEON i.e., VEON and Telefonica go up and down completely randomly.

Pair Corralation between VEON and Telefonica

Given the investment horizon of 90 days VEON is expected to generate 2.25 times more return on investment than Telefonica. However, VEON is 2.25 times more volatile than Telefonica SA ADR. It trades about 0.21 of its potential returns per unit of risk. Telefonica SA ADR is currently generating about 0.05 per unit of risk. If you would invest  3,395  in VEON on November 28, 2024 and sell it today you would earn a total of  1,114  from holding VEON or generate 32.81% return on investment over 90 days.

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

VEON  vs.  Telefonica SA ADR

VEON

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VEON are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, VEON displayed solid returns over the last few months and may actually be approaching a breakup point.

Telefonica SA ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica SA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Telefonica is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VEON and Telefonica

The main advantage of trading using opposite VEON and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VEON 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 VEON 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.