Correlation Between Telefonica and Hellenic Telecommunicatio

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

Diversification Opportunities for Telefonica and Hellenic Telecommunicatio

0.83

Correlation Coefficient

Telefonica  Hellenic Telecommunicatio

Very poor diversification

The 3 months correlation between Telefonica and Hellenic is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Hellenic Telecommunications Or in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hellenic Telecommunicatio 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 Hellenic Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hellenic Telecommunicatio has no effect on the direction of Telefonica i.e., Telefonica and Hellenic Telecommunicatio go up and down completely randomly.

Pair Corralation between Telefonica and Hellenic Telecommunicatio

Considering the 90-day investment horizon Telefonica is expected to generate 1.23 times less return on investment than Hellenic Telecommunicatio. But when comparing it to its historical volatility, Telefonica SA ADR is 1.27 times less risky than Hellenic Telecommunicatio. It trades about 0.18 of its potential returns per unit of risk. Hellenic Telecommunications Org is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  852.00  in Hellenic Telecommunications Org on February 1, 2025 and sell it today you would earn a total of  98.00  from holding Hellenic Telecommunications Org or generate 11.5% return on investment over 90 days.

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

Telefonica SA ADR  vs.  Hellenic Telecommunications Or

Telefonica SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica SA ADR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Telefonica reported solid returns over the last few months and may actually be approaching a breakup point.

Hellenic Telecommunicatio

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hellenic Telecommunications Org are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Hellenic Telecommunicatio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonica and Hellenic Telecommunicatio

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

The idea behind Telefonica SA ADR and Hellenic Telecommunications Org 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.