Correlation Between Nasdaq and Telefnica Brasil

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

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

Diversification Opportunities for Nasdaq and Telefnica Brasil

0.29

Correlation Coefficient

Nasdaq  Telefnica Brasil

Modest diversification

The 3 months correlation between Nasdaq and Telefnica is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Telefnica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica Brasil and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Telefnica Brasil go up and down completely randomly.

Pair Corralation between Nasdaq and Telefnica Brasil

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Telefnica Brasil. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.3 times less risky than Telefnica Brasil. The stock trades about -0.03 of its potential returns per unit of risk. The Telefnica Brasil SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,540  in Telefnica Brasil SA on December 28, 2024 and sell it today you would earn a total of  499.00  from holding Telefnica Brasil SA or generate 10.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Nasdaq Inc  vs.  Telefnica Brasil SA

Nasdaq Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Nasdaq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Telefnica Brasil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telefnica Brasil SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Telefnica Brasil may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nasdaq and Telefnica Brasil

The main advantage of trading using opposite Nasdaq and Telefnica Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.