Correlation Between Telefonica Brasil and Magyar Telekom

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

Diversification Opportunities for Telefonica Brasil and Magyar Telekom

-0.77

Correlation Coefficient

Telefonica Brasil  Magyar Telekom

Pay attention - limited upside

The 3 months correlation between Telefonica and Magyar is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and Magyar Telekom Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Telekom Plc 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 Magyar Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magyar Telekom Plc has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and Magyar Telekom go up and down completely randomly.

Pair Corralation between Telefonica Brasil and Magyar Telekom

Considering the 90-day investment horizon Telefonica Brasil SA is expected to under-perform the Magyar Telekom. But the stock apears to be less risky and, when comparing its historical volatility, Telefonica Brasil SA is 1.32 times less risky than Magyar Telekom. The stock trades about -0.07 of its potential returns per unit of risk. The Magyar Telekom Plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,039  in Magyar Telekom Plc on October 2, 2024 and sell it today you would earn a total of  634.00  from holding Magyar Telekom Plc or generate 61.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.56%
Values	Daily Returns

Telefonica Brasil SA  vs.  Magyar Telekom Plc

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.

Magyar Telekom Plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Telekom Plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Magyar Telekom showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonica Brasil and Magyar Telekom

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

The idea behind Telefonica Brasil SA and Magyar Telekom Plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.