Correlation Between T Mobile and Telefonica Brasil

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

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

Diversification Opportunities for T Mobile and Telefonica Brasil

-0.89

Correlation Coefficient

T Mobile  Telefonica Brasil

Pay attention - limited upside

The 3 months correlation between TMUS and Telefonica is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil and T Mobile 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 T Mobile 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 T Mobile i.e., T Mobile and Telefonica Brasil go up and down completely randomly.

Pair Corralation between T Mobile and Telefonica Brasil

Given the investment horizon of 90 days T Mobile is expected to generate 0.89 times more return on investment than Telefonica Brasil. However, T Mobile is 1.12 times less risky than Telefonica Brasil. It trades about 0.16 of its potential returns per unit of risk. Telefonica Brasil SA is currently generating about -0.12 per unit of risk. If you would invest  20,168  in T Mobile on September 12, 2024 and sell it today you would earn a total of  3,182  from holding T Mobile or generate 15.78% return on investment over 90 days.

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

T Mobile  vs.  Telefonica Brasil SA

T Mobile

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, T Mobile unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 latest unfluctuating performance, the Stock's forward indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with T Mobile and Telefonica Brasil

The main advantage of trading using opposite T Mobile and Telefonica Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Mobile 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 T Mobile 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.