Correlation Between Telefnica Brasil and Livetech

Can any of the company-specific risk be diversified away by investing in both Telefnica Brasil and Livetech 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 Telefnica Brasil and Livetech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Telefnica Brasil SA and Livetech da Bahia, you can compare the effects of market volatilities on Telefnica Brasil and Livetech 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 Telefnica Brasil with a short position of Livetech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefnica Brasil and Livetech.

Diversification Opportunities for Telefnica Brasil and Livetech

0.89

Correlation Coefficient

Telefnica Brasil  Livetech

Very poor diversification

The 3 months correlation between Telefnica and Livetech is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica Brasil SA and Livetech da Bahia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livetech da Bahia and Telefnica 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 Telefnica Brasil SA are associated (or correlated) with Livetech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livetech da Bahia has no effect on the direction of Telefnica Brasil i.e., Telefnica Brasil and Livetech go up and down completely randomly.

Pair Corralation between Telefnica Brasil and Livetech

Assuming the 90 days trading horizon Telefnica Brasil SA is expected to generate 0.59 times more return on investment than Livetech. However, Telefnica Brasil SA is 1.71 times less risky than Livetech. It trades about -0.05 of its potential returns per unit of risk. Livetech da Bahia is currently generating about -0.26 per unit of risk. If you would invest  5,460  in Telefnica Brasil SA on September 12, 2024 and sell it today you would lose (235.00) from holding Telefnica Brasil SA or give up 4.3% of portfolio value over 90 days.

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

Telefnica Brasil SA  vs.  Livetech da Bahia

Telefnica Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefnica Brasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Telefnica Brasil is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Livetech da Bahia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Livetech da Bahia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Telefnica Brasil and Livetech

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

The idea behind Telefnica Brasil SA and Livetech da Bahia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.