Correlation Between TELECOM PLUS and Companhia Energética

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

By analyzing existing cross correlation between TELECOM PLUS PLC and Companhia Energtica de, you can compare the effects of market volatilities on TELECOM PLUS and Companhia Energética 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 TELECOM PLUS with a short position of Companhia Energética. Check out your portfolio center. Please also check ongoing floating volatility patterns of TELECOM PLUS and Companhia Energética.

Diversification Opportunities for TELECOM PLUS and Companhia Energética

0.07

Correlation Coefficient

TELECOM PLUS  Companhia Energética

Significant diversification

The 3 months correlation between TELECOM and Companhia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding TELECOM PLUS PLC and Companhia Energtica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energética and TELECOM PLUS 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 TELECOM PLUS PLC are associated (or correlated) with Companhia Energética. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energética has no effect on the direction of TELECOM PLUS i.e., TELECOM PLUS and Companhia Energética go up and down completely randomly.

Pair Corralation between TELECOM PLUS and Companhia Energética

Assuming the 90 days horizon TELECOM PLUS is expected to generate 13.37 times less return on investment than Companhia Energética. But when comparing it to its historical volatility, TELECOM PLUS PLC is 2.01 times less risky than Companhia Energética. It trades about 0.01 of its potential returns per unit of risk. Companhia Energtica de is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Companhia Energtica de on October 11, 2024 and sell it today you would earn a total of  146.00  from holding Companhia Energtica de or generate 470.97% return on investment over 90 days.

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

TELECOM PLUS PLC  vs.  Companhia Energtica de

TELECOM PLUS PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELECOM PLUS PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TELECOM PLUS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Companhia Energética

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica de are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Companhia Energética reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TELECOM PLUS and Companhia Energética

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

The idea behind TELECOM PLUS PLC and Companhia Energtica de 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.