Correlation Between Cellnex Telecom and Laboratorio Reig

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

By analyzing existing cross correlation between Cellnex Telecom SA and Laboratorio Reig Jofre, you can compare the effects of market volatilities on Cellnex Telecom and Laboratorio Reig 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 Cellnex Telecom with a short position of Laboratorio Reig. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cellnex Telecom and Laboratorio Reig.

Diversification Opportunities for Cellnex Telecom and Laboratorio Reig

-0.62

Correlation Coefficient

Cellnex Telecom  Laboratorio Reig

Excellent diversification

The 3 months correlation between Cellnex and Laboratorio is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cellnex Telecom SA and Laboratorio Reig Jofre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratorio Reig Jofre and Cellnex Telecom 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 Cellnex Telecom SA are associated (or correlated) with Laboratorio Reig. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laboratorio Reig Jofre has no effect on the direction of Cellnex Telecom i.e., Cellnex Telecom and Laboratorio Reig go up and down completely randomly.

Pair Corralation between Cellnex Telecom and Laboratorio Reig

Assuming the 90 days trading horizon Cellnex Telecom SA is expected to generate 0.94 times more return on investment than Laboratorio Reig. However, Cellnex Telecom SA is 1.06 times less risky than Laboratorio Reig. It trades about 0.26 of its potential returns per unit of risk. Laboratorio Reig Jofre is currently generating about 0.01 per unit of risk. If you would invest  2,979  in Cellnex Telecom SA on February 7, 2024 and sell it today you would earn a total of  303.00  from holding Cellnex Telecom SA or generate 10.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Cellnex Telecom SA  vs.  Laboratorio Reig Jofre

Cellnex Telecom SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cellnex Telecom SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cellnex Telecom is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Laboratorio Reig Jofre

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Laboratorio Reig Jofre are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Laboratorio Reig may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Cellnex Telecom and Laboratorio Reig

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

The idea behind Cellnex Telecom SA and Laboratorio Reig Jofre 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.