Correlation Between Telefonica and Alphabet
Can any of the company-specific risk be diversified away by investing in both Telefonica and Alphabet 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 Telefonica and Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonica SA ADR and Alphabet Inc Class C, you can compare the effects of market volatilities on Telefonica and Alphabet 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 Telefonica with a short position of Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Alphabet.
Diversification Opportunities for Telefonica and Alphabet
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telefonica and Alphabet is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C and Telefonica 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 Telefonica SA ADR are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of Telefonica i.e., Telefonica and Alphabet go up and down completely randomly.
Pair Corralation between Telefonica and Alphabet
Considering the 90-day investment horizon Telefonica is expected to generate 3.96 times less return on investment than Alphabet. But when comparing it to its historical volatility, Telefonica SA ADR is 1.43 times less risky than Alphabet. It trades about 0.02 of its potential returns per unit of risk. Alphabet Inc Class C is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 11,240 in Alphabet Inc Class C on February 7, 2024 and sell it today you would earn a total of 5,743 from holding Alphabet Inc Class C or generate 51.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonica SA ADR vs. Alphabet Inc Class C
Performance |
| Timeline |
| Telefonica SA ADR |
| Alphabet Class C |
Telefonica and Alphabet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonica and Alphabet
The main advantage of trading using opposite Telefonica and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet's long position.| Telefonica vs. T Mobile | Telefonica vs. Comcast Corp | Telefonica vs. Charter Communications | Telefonica vs. Vodafone Group PLC |
Check out your portfolio center.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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