Correlation Between Oi SA and Telefnica Brasil
Can any of the company-specific risk be diversified away by investing in both Oi SA and Telefnica 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 Oi SA and Telefnica Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oi SA and Telefnica Brasil SA, you can compare the effects of market volatilities on Oi SA and Telefnica 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 Oi SA with a short position of Telefnica Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oi SA and Telefnica Brasil.
Diversification Opportunities for Oi SA and Telefnica Brasil
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between OIBR3 and Telefnica is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Oi SA and Telefnica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica Brasil and Oi SA 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 Oi SA are associated (or correlated) with Telefnica Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica Brasil has no effect on the direction of Oi SA i.e., Oi SA and Telefnica Brasil go up and down completely randomly.
Pair Corralation between Oi SA and Telefnica Brasil
Assuming the 90 days trading horizon Oi SA is expected to generate 82.9 times more return on investment than Telefnica Brasil. However, Oi SA is 82.9 times more volatile than Telefnica Brasil SA. It trades about 0.11 of its potential returns per unit of risk. Telefnica Brasil SA is currently generating about 0.06 per unit of risk. If you would invest 1,800 in Oi SA on August 27, 2024 and sell it today you would lose (1,654) from holding Oi SA or give up 91.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Oi SA vs. Telefnica Brasil SA
Performance |
| Timeline |
| Oi SA |
| Telefnica Brasil |
Oi SA and Telefnica Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oi SA and Telefnica Brasil
The main advantage of trading using opposite Oi SA and Telefnica Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oi SA position performs unexpectedly, Telefnica 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 Telefnica Brasil will offset losses from the drop in Telefnica Brasil's long position.The idea behind Oi SA and Telefnica Brasil 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.| Telefnica Brasil vs. T Mobile | Telefnica Brasil vs. Verizon Communications | Telefnica Brasil vs. Telefnica SA |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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