Correlation Between GSK Plc and Telecomunicaes Brasileiras
Can any of the company-specific risk be diversified away by investing in both GSK Plc 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 GSK Plc and Telecomunicaes Brasileiras into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GSK plc and Telecomunicaes Brasileiras SA, you can compare the effects of market volatilities on GSK Plc 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 GSK Plc with a short position of Telecomunicaes Brasileiras. Check out your portfolio center. Please also check ongoing floating volatility patterns of GSK Plc and Telecomunicaes Brasileiras.
Diversification Opportunities for GSK Plc and Telecomunicaes Brasileiras
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GSK and Telecomunicaes is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding GSK plc and Telecomunicaes Brasileiras SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecomunicaes Brasileiras and GSK Plc 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 GSK plc 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 GSK Plc i.e., GSK Plc and Telecomunicaes Brasileiras go up and down completely randomly.
Pair Corralation between GSK Plc and Telecomunicaes Brasileiras
Assuming the 90 days trading horizon GSK plc is expected to generate 0.86 times more return on investment than Telecomunicaes Brasileiras. However, GSK plc is 1.17 times less risky than Telecomunicaes Brasileiras. It trades about 0.0 of its potential returns per unit of risk. Telecomunicaes Brasileiras SA is currently generating about -0.03 per unit of risk. If you would invest 4,284 in GSK plc on September 5, 2024 and sell it today you would lose (56.00) from holding GSK plc or give up 1.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.43% |
| Values | Daily Returns |
GSK plc vs. Telecomunicaes Brasileiras SA
Performance |
| Timeline |
| GSK plc |
| Telecomunicaes Brasileiras |
GSK Plc and Telecomunicaes Brasileiras Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GSK Plc and Telecomunicaes Brasileiras
The main advantage of trading using opposite GSK Plc and Telecomunicaes Brasileiras positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSK Plc 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.| GSK Plc vs. Telecomunicaes Brasileiras SA | GSK Plc vs. Cognizant Technology Solutions | GSK Plc vs. T Mobile | GSK Plc vs. Take Two Interactive Software |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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