Correlation Between Telefonica Brasil and U S Cellular

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

Diversification Opportunities for Telefonica Brasil and U S Cellular

0.71

Correlation Coefficient

Telefonica Brasil  U S Cellular

Poor diversification

The 3 months correlation between Telefonica and USM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular 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 U S Cellular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and U S Cellular go up and down completely randomly.

Pair Corralation between Telefonica Brasil and U S Cellular

Considering the 90-day investment horizon Telefonica Brasil SA is expected to generate 1.2 times more return on investment than U S Cellular. However, Telefonica Brasil is 1.2 times more volatile than United States Cellular. It trades about 0.13 of its potential returns per unit of risk. United States Cellular is currently generating about 0.08 per unit of risk. If you would invest  780.00  in Telefonica Brasil SA on December 19, 2024 and sell it today you would earn a total of  116.00  from holding Telefonica Brasil SA or generate 14.87% return on investment over 90 days.

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

Telefonica Brasil SA  vs.  United States Cellular

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 10 (%) 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.

United States Cellular

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, U S Cellular may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Telefonica Brasil and U S Cellular

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

The idea behind Telefonica Brasil SA and United States Cellular 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.