Correlation Between PLDT and Telefonica Brasil

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

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

Diversification Opportunities for PLDT and Telefonica Brasil

0.55

Correlation Coefficient

PLDT  Telefonica Brasil

Very weak diversification

The 3 months correlation between PLDT and Telefonica is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding PLDT Inc ADR and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil and PLDT 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 PLDT Inc ADR 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 PLDT i.e., PLDT and Telefonica Brasil go up and down completely randomly.

Pair Corralation between PLDT and Telefonica Brasil

Considering the 90-day investment horizon PLDT is expected to generate 4.21 times less return on investment than Telefonica Brasil. But when comparing it to its historical volatility, PLDT Inc ADR is 1.55 times less risky than Telefonica Brasil. It trades about 0.06 of its potential returns per unit of risk. 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 29, 2024 and sell it today you would earn a total of  131.00  from holding Telefonica Brasil SA or generate 17.51% return on investment over 90 days.

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

PLDT Inc ADR  vs.  Telefonica Brasil SA

PLDT Inc ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PLDT Inc ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, PLDT is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

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 PLDT and Telefonica Brasil

The main advantage of trading using opposite PLDT and Telefonica Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLDT 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 PLDT Inc ADR 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.