Correlation Between Telefonica Brasil and Liberty Broadband

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

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

Diversification Opportunities for Telefonica Brasil and Liberty Broadband

0.18

Correlation Coefficient

Telefonica Brasil  Liberty Broadband

Average diversification

The 3 months correlation between Telefonica and Liberty is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and Liberty Broadband Srs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Srs and Telefonica Brasil 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 Telefonica Brasil SA are associated (or correlated) with Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband Srs has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and Liberty Broadband go up and down completely randomly.

Pair Corralation between Telefonica Brasil and Liberty Broadband

Considering the 90-day investment horizon Telefonica Brasil SA is expected to under-perform the Liberty Broadband. But the stock apears to be less risky and, when comparing its historical volatility, Telefonica Brasil SA is 1.25 times less risky than Liberty Broadband. The stock trades about -0.28 of its potential returns per unit of risk. The Liberty Broadband Srs is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  8,648  in Liberty Broadband Srs on October 6, 2024 and sell it today you would lose (888.00) from holding Liberty Broadband Srs or give up 10.27% of portfolio value over 90 days.

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

Telefonica Brasil SA  vs.  Liberty Broadband Srs

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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Liberty Broadband Srs

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Srs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Liberty Broadband is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Telefonica Brasil and Liberty Broadband

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

The idea behind Telefonica Brasil SA and Liberty Broadband Srs 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.