Correlation Between Telenor ASA and Telefonica Brasil

Can any of the company-specific risk be diversified away by investing in both Telenor ASA and Telefonica Brasil 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 Telenor ASA and Telefonica Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Telenor ASA and Telefonica Brasil SA, you can compare the effects of market volatilities on Telenor ASA and Telefonica Brasil 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 Telenor ASA with a short position of Telefonica Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telenor ASA and Telefonica Brasil.

Diversification Opportunities for Telenor ASA and Telefonica Brasil

0.87

Correlation Coefficient

Telenor ASA  Telefonica Brasil

Very poor diversification

The 3 months correlation between Telenor and Telefonica is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Telenor ASA and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil and Telenor ASA 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 Telenor ASA are associated (or correlated) with Telefonica Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica Brasil has no effect on the direction of Telenor ASA i.e., Telenor ASA and Telefonica Brasil go up and down completely randomly.

Pair Corralation between Telenor ASA and Telefonica Brasil

Assuming the 90 days horizon Telenor ASA is expected to generate 1.46 times more return on investment than Telefonica Brasil. However, Telenor ASA is 1.46 times more volatile than Telefonica Brasil SA. It trades about 0.03 of its potential returns per unit of risk. Telefonica Brasil SA is currently generating about -0.07 per unit of risk. If you would invest  1,010  in Telenor ASA on October 2, 2024 and sell it today you would earn a total of  71.00  from holding Telenor ASA or generate 7.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	81.22%
Values	Daily Returns

Telenor ASA  vs.  Telefonica Brasil SA

Telenor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telenor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Telefonica Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonica Brasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Telenor ASA and Telefonica Brasil

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

The idea behind Telenor ASA and Telefonica Brasil SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.