Correlation Between Telecomunicaes Brasileiras and NatWest Group

Can any of the company-specific risk be diversified away by investing in both Telecomunicaes Brasileiras and NatWest Group 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 NatWest Group 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 NatWest Group plc, you can compare the effects of market volatilities on Telecomunicaes Brasileiras and NatWest Group 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 NatWest Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecomunicaes Brasileiras and NatWest Group.

Diversification Opportunities for Telecomunicaes Brasileiras and NatWest Group

-0.88

Correlation Coefficient

Telecomunicaes Brasileiras  NatWest Group

Pay attention - limited upside

The 3 months correlation between Telecomunicaes and NatWest is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and NatWest Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NatWest Group plc 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 NatWest Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NatWest Group plc has no effect on the direction of Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and NatWest Group go up and down completely randomly.

Pair Corralation between Telecomunicaes Brasileiras and NatWest Group

Assuming the 90 days trading horizon Telecomunicaes Brasileiras SA is expected to under-perform the NatWest Group. In addition to that, Telecomunicaes Brasileiras is 1.19 times more volatile than NatWest Group plc. It trades about -0.06 of its total potential returns per unit of risk. NatWest Group plc is currently generating about 0.14 per unit of volatility. If you would invest  4,140  in NatWest Group plc on October 9, 2024 and sell it today you would earn a total of  2,079  from holding NatWest Group plc or generate 50.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.4%
Values	Daily Returns

Telecomunicaes Brasileiras SA  vs.  NatWest Group plc

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.

NatWest Group plc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NatWest Group plc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NatWest Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecomunicaes Brasileiras and NatWest Group

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

The idea behind Telecomunicaes Brasileiras SA and NatWest Group plc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.