Correlation Between Telefonica Brasil and Lumen Technologies

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

Diversification Opportunities for Telefonica Brasil and Lumen Technologies

-0.4

Correlation Coefficient

Telefonica Brasil  Lumen Technologies

Very good diversification

The 3 months correlation between Telefonica and Lumen is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies 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 Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and Lumen Technologies go up and down completely randomly.

Pair Corralation between Telefonica Brasil and Lumen Technologies

Considering the 90-day investment horizon Telefonica Brasil SA is expected to under-perform the Lumen Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Telefonica Brasil SA is 3.06 times less risky than Lumen Technologies. The stock trades about -0.13 of its potential returns per unit of risk. The Lumen Technologies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  471.00  in Lumen Technologies on September 3, 2024 and sell it today you would earn a total of  228.00  from holding Lumen Technologies or generate 48.41% return on investment over 90 days.

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

Telefonica Brasil SA  vs.  Lumen Technologies

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.

Lumen Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lumen Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Lumen Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonica Brasil and Lumen Technologies

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

The idea behind Telefonica Brasil SA and Lumen Technologies 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.