Correlation Between Telecomunicaes Brasileiras and MAHLE Metal
Can any of the company-specific risk be diversified away by investing in both Telecomunicaes Brasileiras and MAHLE Metal 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 MAHLE Metal 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 MAHLE Metal Leve, you can compare the effects of market volatilities on Telecomunicaes Brasileiras and MAHLE Metal 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 MAHLE Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecomunicaes Brasileiras and MAHLE Metal.
Diversification Opportunities for Telecomunicaes Brasileiras and MAHLE Metal
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telecomunicaes and MAHLE is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and MAHLE Metal Leve in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAHLE Metal Leve 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 MAHLE Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAHLE Metal Leve has no effect on the direction of Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and MAHLE Metal go up and down completely randomly.
Pair Corralation between Telecomunicaes Brasileiras and MAHLE Metal
Assuming the 90 days trading horizon Telecomunicaes Brasileiras SA is expected to under-perform the MAHLE Metal. In addition to that, Telecomunicaes Brasileiras is 1.76 times more volatile than MAHLE Metal Leve. It trades about -0.12 of its total potential returns per unit of risk. MAHLE Metal Leve is currently generating about -0.13 per unit of volatility. If you would invest 3,015 in MAHLE Metal Leve on September 6, 2024 and sell it today you would lose (316.00) from holding MAHLE Metal Leve or give up 10.48% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Telecomunicaes Brasileiras SA vs. MAHLE Metal Leve
Performance |
Timeline |
Telecomunicaes Brasileiras |
MAHLE Metal Leve |
Telecomunicaes Brasileiras and MAHLE Metal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Telecomunicaes Brasileiras and MAHLE Metal
The main advantage of trading using opposite Telecomunicaes Brasileiras and MAHLE Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecomunicaes Brasileiras position performs unexpectedly, MAHLE Metal 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 MAHLE Metal will offset losses from the drop in MAHLE Metal's long position.The idea behind Telecomunicaes Brasileiras SA and MAHLE Metal Leve 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation |