Correlation Between Telefonica and ATT

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

Diversification Opportunities for Telefonica and ATT

-0.45

Correlation Coefficient

Telefonica  ATT

Very good diversification

The 3 months correlation between Telefonica and ATT is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Telefonica i.e., Telefonica and ATT go up and down completely randomly.

Pair Corralation between Telefonica and ATT

Considering the 90-day investment horizon Telefonica SA ADR is expected to under-perform the ATT. But the stock apears to be less risky and, when comparing its historical volatility, Telefonica SA ADR is 1.09 times less risky than ATT. The stock trades about -0.13 of its potential returns per unit of risk. The ATT Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,163  in ATT Inc on September 4, 2024 and sell it today you would earn a total of  107.00  from holding ATT Inc or generate 4.95% return on investment over 90 days.

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

Telefonica SA ADR  vs.  ATT Inc

Telefonica SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonica SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Telefonica is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ATT Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonica and ATT

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

The idea behind Telefonica SA ADR and ATT Inc 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.