Correlation Between Telefonica and Comcast Corp

Can any of the company-specific risk be diversified away by investing in both Telefonica and Comcast Corp 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 Comcast Corp 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 Comcast Corp, you can compare the effects of market volatilities on Telefonica and Comcast Corp 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 Comcast Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Comcast Corp.

Diversification Opportunities for Telefonica and Comcast Corp

-0.24

Correlation Coefficient

Telefonica  Comcast Corp

Very good diversification

The 3 months correlation between Telefonica and Comcast is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Comcast Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comcast Corp 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 Comcast Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comcast Corp has no effect on the direction of Telefonica i.e., Telefonica and Comcast Corp go up and down completely randomly.

Pair Corralation between Telefonica and Comcast Corp

Considering the 90-day investment horizon Telefonica SA ADR is expected to generate 0.67 times more return on investment than Comcast Corp. However, Telefonica SA ADR is 1.5 times less risky than Comcast Corp. It trades about 0.13 of its potential returns per unit of risk. Comcast Corp is currently generating about -0.22 per unit of risk. If you would invest  439.00  in Telefonica SA ADR on January 31, 2024 and sell it today you would earn a total of  13.00  from holding Telefonica SA ADR or generate 2.96% return on investment over 90 days.

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

Telefonica SA ADR  vs.  Comcast Corp

Telefonica SA ADR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica SA ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Telefonica may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Comcast Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Comcast Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Telefonica and Comcast Corp

The main advantage of trading using opposite Telefonica and Comcast Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica position performs unexpectedly, Comcast Corp 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 Comcast Corp will offset losses from the drop in Comcast Corp's long position.

The idea behind Telefonica SA ADR and Comcast Corp 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.