Correlation Between Auren Energia and Telefnica Brasil

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

By analyzing existing cross correlation between Auren Energia SA and Telefnica Brasil SA, you can compare the effects of market volatilities on Auren Energia and Telefnica Brasil 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 Auren Energia with a short position of Telefnica Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auren Energia and Telefnica Brasil.

Diversification Opportunities for Auren Energia and Telefnica Brasil

0.85

Correlation Coefficient

Auren Energia  Telefnica Brasil

Very poor diversification

The 3 months correlation between Auren and Telefnica is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Auren Energia SA and Telefnica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica Brasil and Auren Energia 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 Auren Energia SA are associated (or correlated) with Telefnica Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica Brasil has no effect on the direction of Auren Energia i.e., Auren Energia and Telefnica Brasil go up and down completely randomly.

Pair Corralation between Auren Energia and Telefnica Brasil

Assuming the 90 days trading horizon Auren Energia SA is expected to generate 74.84 times more return on investment than Telefnica Brasil. However, Auren Energia is 74.84 times more volatile than Telefnica Brasil SA. It trades about 0.1 of its potential returns per unit of risk. Telefnica Brasil SA is currently generating about 0.01 per unit of risk. If you would invest  1,290  in Auren Energia SA on October 9, 2024 and sell it today you would lose (448.00) from holding Auren Energia SA or give up 34.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.8%
Values	Daily Returns

Auren Energia SA  vs.  Telefnica Brasil SA

Auren Energia SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auren Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Telefnica Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefnica Brasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Auren Energia and Telefnica Brasil

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

The idea behind Auren Energia SA and Telefnica Brasil SA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.