Correlation Between Telecomunicaes Brasileiras and Planet Fitness

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

Diversification Opportunities for Telecomunicaes Brasileiras and Planet Fitness

-0.27

Correlation Coefficient

Telecomunicaes Brasileiras  Planet Fitness

Very good diversification

The 3 months correlation between Telecomunicaes and Planet is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness 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 Planet Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Fitness has no effect on the direction of Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and Planet Fitness go up and down completely randomly.

Pair Corralation between Telecomunicaes Brasileiras and Planet Fitness

Assuming the 90 days trading horizon Telecomunicaes Brasileiras SA is expected to under-perform the Planet Fitness. But the preferred stock apears to be less risky and, when comparing its historical volatility, Telecomunicaes Brasileiras SA is 5.04 times less risky than Planet Fitness. The preferred stock trades about -0.06 of its potential returns per unit of risk. The Planet Fitness is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,984  in Planet Fitness on September 12, 2024 and sell it today you would earn a total of  3,608  from holding Planet Fitness or generate 90.56% return on investment over 90 days.

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

Telecomunicaes Brasileiras SA  vs.  Planet Fitness

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 latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Planet Fitness

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Fitness are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Planet Fitness sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecomunicaes Brasileiras and Planet Fitness

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

The idea behind Telecomunicaes Brasileiras SA and Planet Fitness 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .