Correlation Between Telefonica and ATN International

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

Diversification Opportunities for Telefonica and ATN International

-0.78

Correlation Coefficient

Telefonica  ATN International

Pay attention - limited upside

The 3 months correlation between Telefonica and ATN is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and ATN International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATN International 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 ATN International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATN International has no effect on the direction of Telefonica i.e., Telefonica and ATN International go up and down completely randomly.

Pair Corralation between Telefonica and ATN International

Considering the 90-day investment horizon Telefonica SA ADR is expected to generate 0.15 times more return on investment than ATN International. However, Telefonica SA ADR is 6.62 times less risky than ATN International. It trades about 0.25 of its potential returns per unit of risk. ATN International is currently generating about -0.12 per unit of risk. If you would invest  429.00  in Telefonica SA ADR on February 5, 2024 and sell it today you would earn a total of  27.00  from holding Telefonica SA ADR or generate 6.29% return on investment over 90 days.

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

Telefonica SA ADR  vs.  ATN International

Telefonica SA ADR

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica SA ADR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Telefonica reported solid returns over the last few months and may actually be approaching a breakup point.

ATN International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATN International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Telefonica and ATN International

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

The idea behind Telefonica SA ADR and ATN International 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.