Correlation Between Telecomunicaes Brasileiras and Fresenius Medical

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

By analyzing existing cross correlation between Telecomunicaes Brasileiras SA and Fresenius Medical Care, you can compare the effects of market volatilities on Telecomunicaes Brasileiras and Fresenius Medical 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 Telecomunicaes Brasileiras with a short position of Fresenius Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecomunicaes Brasileiras and Fresenius Medical.

Diversification Opportunities for Telecomunicaes Brasileiras and Fresenius Medical

-0.4

Correlation Coefficient

Telecomunicaes Brasileiras  Fresenius Medical

Very good diversification

The 3 months correlation between Telecomunicaes and Fresenius is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care and Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras SA are associated (or correlated) with Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and Fresenius Medical go up and down completely randomly.

Pair Corralation between Telecomunicaes Brasileiras and Fresenius Medical

Assuming the 90 days trading horizon Telecomunicaes Brasileiras SA is expected to under-perform the Fresenius Medical. But the preferred stock apears to be less risky and, when comparing its historical volatility, Telecomunicaes Brasileiras SA is 1.41 times less risky than Fresenius Medical. The preferred stock trades about -0.17 of its potential returns per unit of risk. The Fresenius Medical Care is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  11,322  in Fresenius Medical Care on October 22, 2024 and sell it today you would earn a total of  2,367  from holding Fresenius Medical Care or generate 20.91% return on investment over 90 days.

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

Telecomunicaes Brasileiras SA  vs.  Fresenius Medical Care

Telecomunicaes Brasileiras

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telecomunicaes Brasileiras SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred 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.

Fresenius Medical Care

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fresenius Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecomunicaes Brasileiras and Fresenius Medical

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

The idea behind Telecomunicaes Brasileiras SA and Fresenius Medical Care 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.