Correlation Between Telefonica Brasil and Pegasus Tel

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

Diversification Opportunities for Telefonica Brasil and Pegasus Tel

0.09

Correlation Coefficient

Telefonica Brasil  Pegasus Tel

Significant diversification

The 3 months correlation between Telefonica and Pegasus is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and Pegasus Tel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegasus Tel 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 Pegasus Tel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegasus Tel has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and Pegasus Tel go up and down completely randomly.

Pair Corralation between Telefonica Brasil and Pegasus Tel

Considering the 90-day investment horizon Telefonica Brasil SA is expected to under-perform the Pegasus Tel. But the stock apears to be less risky and, when comparing its historical volatility, Telefonica Brasil SA is 9.67 times less risky than Pegasus Tel. The stock trades about -0.07 of its potential returns per unit of risk. The Pegasus Tel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Pegasus Tel on October 2, 2024 and sell it today you would earn a total of  0.09  from holding Pegasus Tel or generate 180.0% return on investment over 90 days.

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

Telefonica Brasil SA  vs.  Pegasus Tel

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.

Pegasus Tel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pegasus Tel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Pegasus Tel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonica Brasil and Pegasus Tel

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

The idea behind Telefonica Brasil SA and Pegasus Tel 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.