Correlation Between Telefonica Brasil and Liberty Latin

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

Diversification Opportunities for Telefonica Brasil and Liberty Latin

0.54

Correlation Coefficient

Telefonica Brasil  Liberty Latin

Very weak diversification

The 3 months correlation between Telefonica and Liberty is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and Liberty Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Latin America 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 Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Latin America has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and Liberty Latin go up and down completely randomly.

Pair Corralation between Telefonica Brasil and Liberty Latin

Considering the 90-day investment horizon Telefonica Brasil is expected to generate 1.36 times less return on investment than Liberty Latin. But when comparing it to its historical volatility, Telefonica Brasil SA is 1.17 times less risky than Liberty Latin. It trades about 0.04 of its potential returns per unit of risk. Liberty Latin America is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  691.00  in Liberty Latin America on November 19, 2024 and sell it today you would earn a total of  42.00  from holding Liberty Latin America or generate 6.08% return on investment over 90 days.

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

Telefonica Brasil SA  vs.  Liberty Latin America

Telefonica Brasil

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica Brasil SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, Telefonica Brasil is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Liberty Latin America

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Latin America are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Liberty Latin may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Telefonica Brasil and Liberty Latin

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

The idea behind Telefonica Brasil SA and Liberty Latin America 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.