Correlation Between Telephone and Telefonica

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

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

Diversification Opportunities for Telephone and Telefonica

0.53

Correlation Coefficient

Telephone  Telefonica

Very weak diversification

The 3 months correlation between Telephone and Telefonica is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Telephone and Data 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 Telephone 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 Telephone and Data 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 Telephone i.e., Telephone and Telefonica go up and down completely randomly.

Pair Corralation between Telephone and Telefonica

Considering the 90-day investment horizon Telephone and Data is expected to generate 1.95 times more return on investment than Telefonica. However, Telephone is 1.95 times more volatile than Telefonica SA ADR. It trades about 0.13 of its potential returns per unit of risk. Telefonica SA ADR is currently generating about 0.1 per unit of risk. If you would invest  3,170  in Telephone and Data on May 4, 2025 and sell it today you would earn a total of  633.00  from holding Telephone and Data or generate 19.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Telephone and Data  vs.  Telefonica SA ADR

Telephone and Data

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telephone and Data are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Telephone unveiled solid returns over the last few months and may actually be approaching a breakup point.

Telefonica SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica SA ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Telefonica may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Telephone and Telefonica

The main advantage of trading using opposite Telephone and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telephone 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 Telephone and Data 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.