Correlation Between Telecomunicaes Brasileiras and Pinduoduo

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

Diversification Opportunities for Telecomunicaes Brasileiras and Pinduoduo

0.52

Correlation Coefficient

Telecomunicaes Brasileiras  Pinduoduo

Very weak diversification

The 3 months correlation between Telecomunicaes and Pinduoduo is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and Pinduoduo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinduoduo 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 Pinduoduo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinduoduo has no effect on the direction of Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and Pinduoduo go up and down completely randomly.

Pair Corralation between Telecomunicaes Brasileiras and Pinduoduo

Assuming the 90 days trading horizon Telecomunicaes Brasileiras is expected to generate 1.07 times less return on investment than Pinduoduo. In addition to that, Telecomunicaes Brasileiras is 1.1 times more volatile than Pinduoduo. It trades about 0.07 of its total potential returns per unit of risk. Pinduoduo is currently generating about 0.08 per unit of volatility. If you would invest  5,917  in Pinduoduo on December 4, 2024 and sell it today you would earn a total of  726.00  from holding Pinduoduo or generate 12.27% return on investment over 90 days.

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

Telecomunicaes Brasileiras SA  vs.  Pinduoduo

Telecomunicaes Brasileiras

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Telecomunicaes Brasileiras SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Telecomunicaes Brasileiras unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pinduoduo

Risk-Adjusted Performance

Modest

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

Pair Trading with Telecomunicaes Brasileiras and Pinduoduo

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

The idea behind Telecomunicaes Brasileiras SA and Pinduoduo 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.