Correlation Between Telefonica Brasil and Telephone

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

Diversification Opportunities for Telefonica Brasil and Telephone

0.55

Correlation Coefficient

Telefonica Brasil  Telephone

Very weak diversification

The 3 months correlation between Telefonica and Telephone is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and Telephone and Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telephone and Data 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 Telephone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telephone and Data has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and Telephone go up and down completely randomly.

Pair Corralation between Telefonica Brasil and Telephone

Considering the 90-day investment horizon Telefonica Brasil SA is expected to generate 1.62 times more return on investment than Telephone. However, Telefonica Brasil is 1.62 times more volatile than Telephone and Data. It trades about 0.12 of its potential returns per unit of risk. Telephone and Data is currently generating about 0.06 per unit of risk. If you would invest  765.00  in Telefonica Brasil SA on December 22, 2024 and sell it today you would earn a total of  106.00  from holding Telefonica Brasil SA or generate 13.86% 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.  Telephone and Data

Telefonica Brasil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica Brasil SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Telefonica Brasil showed solid returns over the last few months and may actually be approaching a breakup point.

Telephone and Data

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Telephone and Data are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Telephone is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Telefonica Brasil and Telephone

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

The idea behind Telefonica Brasil SA and Telephone and Data 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.