Correlation Between BCE and Telefonica Brasil
Can any of the company-specific risk be diversified away by investing in both BCE and Telefonica Brasil 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 BCE and Telefonica Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCE Inc and Telefonica Brasil SA, you can compare the effects of market volatilities on BCE and Telefonica Brasil 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 BCE with a short position of Telefonica Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCE and Telefonica Brasil.
Diversification Opportunities for BCE and Telefonica Brasil
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BCE and Telefonica is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil and BCE 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 BCE Inc are associated (or correlated) with Telefonica Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica Brasil has no effect on the direction of BCE i.e., BCE and Telefonica Brasil go up and down completely randomly.
Pair Corralation between BCE and Telefonica Brasil
Considering the 90-day investment horizon BCE Inc is expected to under-perform the Telefonica Brasil. But the stock apears to be less risky and, when comparing its historical volatility, BCE Inc is 1.0 times less risky than Telefonica Brasil. The stock trades about -0.23 of its potential returns per unit of risk. The Telefonica Brasil SA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 925.00 in Telefonica Brasil SA on August 30, 2024 and sell it today you would lose (59.00) from holding Telefonica Brasil SA or give up 6.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCE Inc vs. Telefonica Brasil SA
Performance |
| Timeline |
| BCE Inc |
| Telefonica Brasil |
BCE and Telefonica Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCE and Telefonica Brasil
The main advantage of trading using opposite BCE and Telefonica Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE position performs unexpectedly, Telefonica Brasil 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 Telefonica Brasil will offset losses from the drop in Telefonica Brasil's long position.| BCE vs. RLJ Lodging Trust | BCE vs. Aquagold International | BCE vs. Stepstone Group | BCE vs. Morningstar Unconstrained Allocation |
| Telefonica Brasil vs. RLJ Lodging Trust | Telefonica Brasil vs. Aquagold International | Telefonica Brasil vs. Stepstone Group | Telefonica Brasil vs. Morningstar Unconstrained Allocation |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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