Correlation Between Dow Jones and Telefonica Brasil
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Telefonica Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Telefonica Brasil SA, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Telefonica Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Telefonica Brasil.
Diversification Opportunities for Dow Jones and Telefonica Brasil
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Telefonica is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Telefonica Brasil go up and down completely randomly.
Pair Corralation between Dow Jones and Telefonica Brasil
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.31 times less return on investment than Telefonica Brasil. But when comparing it to its historical volatility, Dow Jones Industrial is 2.29 times less risky than Telefonica Brasil. It trades about 0.08 of its potential returns per unit of risk. Telefonica Brasil SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 640.00 in Telefonica Brasil SA on August 30, 2024 and sell it today you would earn a total of 250.00 from holding Telefonica Brasil SA or generate 39.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Telefonica Brasil SA
Performance |
| Timeline |
Dow Jones and Telefonica Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Telefonica Brasil SA
Pair trading matchups for Telefonica Brasil
Pair Trading with Dow Jones and Telefonica Brasil
The main advantage of trading using opposite Dow Jones and Telefonica Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| Telefonica Brasil vs. Orange SA ADR | Telefonica Brasil vs. Vodafone Group PLC | Telefonica Brasil vs. Grupo Televisa SAB | Telefonica Brasil vs. America Movil SAB |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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