Correlation Between Liberty Global and Telefonica Brasil

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

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

Diversification Opportunities for Liberty Global and Telefonica Brasil

-0.77

Correlation Coefficient

Liberty Global  Telefonica Brasil

Pay attention - limited upside

The 3 months correlation between Liberty and Telefonica is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Global PLC and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil and Liberty Global 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 Liberty Global PLC are associated (or correlated) with Telefonica Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica Brasil has no effect on the direction of Liberty Global i.e., Liberty Global and Telefonica Brasil go up and down completely randomly.

Pair Corralation between Liberty Global and Telefonica Brasil

Assuming the 90 days horizon Liberty Global PLC is expected to under-perform the Telefonica Brasil. But the stock apears to be less risky and, when comparing its historical volatility, Liberty Global PLC is 1.29 times less risky than Telefonica Brasil. The stock trades about -0.09 of its potential returns per unit of risk. The Telefonica Brasil SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  748.00  in Telefonica Brasil SA on December 30, 2024 and sell it today you would earn a total of  130.00  from holding Telefonica Brasil SA or generate 17.38% return on investment over 90 days.

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

Liberty Global PLC  vs.  Telefonica Brasil SA

Liberty Global PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Global PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Telefonica Brasil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica Brasil SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Telefonica Brasil showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Global and Telefonica Brasil

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

The idea behind Liberty Global PLC and Telefonica 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.