Correlation Between Telefonica and Repsol

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

By analyzing existing cross correlation between Telefonica and Repsol, you can compare the effects of market volatilities on Telefonica and Repsol 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 Repsol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Repsol.

Diversification Opportunities for Telefonica and Repsol

0.71

Correlation Coefficient

Telefonica  Repsol

Poor diversification

The 3 months correlation between Telefonica and Repsol is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica and Repsol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol 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 are associated (or correlated) with Repsol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol has no effect on the direction of Telefonica i.e., Telefonica and Repsol go up and down completely randomly.

Pair Corralation between Telefonica and Repsol

Assuming the 90 days trading horizon Telefonica is expected to generate 3.88 times less return on investment than Repsol. But when comparing it to its historical volatility, Telefonica is 1.18 times less risky than Repsol. It trades about 0.12 of its potential returns per unit of risk. Repsol is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  992.00  in Repsol on April 22, 2025 and sell it today you would earn a total of  314.00  from holding Repsol or generate 31.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Telefonica  vs.  Repsol

Telefonica

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Telefonica may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Repsol

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Repsol are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Repsol exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonica and Repsol

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

The idea behind Telefonica and Repsol 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..