Correlation Between Telecomunicaes Brasileiras and Patria Investments

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

Diversification Opportunities for Telecomunicaes Brasileiras and Patria Investments

-0.59

Correlation Coefficient

Telecomunicaes Brasileiras  Patria Investments

Excellent diversification

The 3 months correlation between Telecomunicaes and Patria is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and Patria Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments 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 Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and Patria Investments go up and down completely randomly.

Pair Corralation between Telecomunicaes Brasileiras and Patria Investments

Assuming the 90 days trading horizon Telecomunicaes Brasileiras SA is expected to generate 1.88 times more return on investment than Patria Investments. However, Telecomunicaes Brasileiras is 1.88 times more volatile than Patria Investments Limited. It trades about 0.12 of its potential returns per unit of risk. Patria Investments Limited is currently generating about -0.05 per unit of risk. If you would invest  730.00  in Telecomunicaes Brasileiras SA on December 28, 2024 and sell it today you would earn a total of  175.00  from holding Telecomunicaes Brasileiras SA or generate 23.97% 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.  Patria Investments Limited

Telecomunicaes Brasileiras

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telecomunicaes Brasileiras SA are ranked lower than 9 (%) 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.

Patria Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Patria Investments Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Patria Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Telecomunicaes Brasileiras and Patria Investments

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

The idea behind Telecomunicaes Brasileiras SA and Patria Investments Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.