Can any of the company-specific risk be diversified away by investing in both Telephone and America Movil 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 America Movil 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 America Movil SAB, you can compare the effects of market volatilities on Telephone and America Movil 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 America Movil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telephone and America Movil.
Diversification Opportunities for Telephone and America Movil
The 3 months correlation between Telephone and America is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Telephone and Data and America Movil SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on America Movil SAB 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 America Movil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of America Movil SAB has no effect on the direction of Telephone i.e., Telephone and America Movil go up and down completely randomly.
Pair Corralation between Telephone and America Movil
Considering the 90-day investment horizon Telephone and Data is expected to generate 2.87 times more return on investment than America Movil. However, Telephone is 2.87 times more volatile than America Movil SAB. It trades about 0.15 of its potential returns per unit of risk. America Movil SAB is currently generating about -0.09 per unit of risk. If you would invest 1,518 in Telephone and Data on March 6, 2024 and sell it today you would earn a total of 735.00 from holding Telephone and Data or generate 48.42% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Telephone and Data are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Telephone unveiled solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days America Movil SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.