Correlation Between Zoom Video and Telecomunicaes Brasileiras

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Can any of the company-specific risk be diversified away by investing in both Zoom Video and Telecomunicaes Brasileiras 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 Zoom Video and Telecomunicaes Brasileiras into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zoom Video Communications and Telecomunicaes Brasileiras SA, you can compare the effects of market volatilities on Zoom Video and Telecomunicaes Brasileiras 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 Zoom Video with a short position of Telecomunicaes Brasileiras. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and Telecomunicaes Brasileiras.

Diversification Opportunities for Zoom Video and Telecomunicaes Brasileiras

-0.89
  Correlation Coefficient

Pay attention - limited upside

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

Pair Corralation between Zoom Video and Telecomunicaes Brasileiras

Assuming the 90 days trading horizon Zoom Video is expected to generate 1.06 times less return on investment than Telecomunicaes Brasileiras. But when comparing it to its historical volatility, Zoom Video Communications is 1.59 times less risky than Telecomunicaes Brasileiras. It trades about 0.04 of its potential returns per unit of risk. Telecomunicaes Brasileiras SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  705.00  in Telecomunicaes Brasileiras SA on September 6, 2024 and sell it today you would earn a total of  111.00  from holding Telecomunicaes Brasileiras SA or generate 15.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Zoom Video Communications  vs.  Telecomunicaes Brasileiras SA

 Performance 
       Timeline  
Zoom Video Communications 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoom Video sustained solid returns over the last few months and may actually be approaching a breakup point.
Telecomunicaes Brasileiras 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Telecomunicaes Brasileiras SA 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 Preferred 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.

Zoom Video and Telecomunicaes Brasileiras Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zoom Video and Telecomunicaes Brasileiras

The main advantage of trading using opposite Zoom Video and Telecomunicaes Brasileiras positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoom Video position performs unexpectedly, Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras will offset losses from the drop in Telecomunicaes Brasileiras' long position.
The idea behind Zoom Video Communications and Telecomunicaes Brasileiras SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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