Correlation Between Telefonica and Telefonica Brasil
Can any of the company-specific risk be diversified away by investing in both Telefonica 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 Telefonica and Telefonica Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonica SA ADR and Telefonica Brasil SA, you can compare the effects of market volatilities on Telefonica 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 Telefonica with a short position of Telefonica Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Telefonica Brasil.
Diversification Opportunities for Telefonica and Telefonica Brasil
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Telefonica and Telefonica is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil and Telefonica 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 Telefonica SA ADR 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 Telefonica i.e., Telefonica and Telefonica Brasil go up and down completely randomly.
Pair Corralation between Telefonica and Telefonica Brasil
Considering the 90-day investment horizon Telefonica SA ADR is expected to generate 0.79 times more return on investment than Telefonica Brasil. However, Telefonica SA ADR is 1.26 times less risky than Telefonica Brasil. It trades about 0.06 of its potential returns per unit of risk. Telefonica Brasil SA is currently generating about 0.04 per unit of risk. If you would invest 312.00 in Telefonica SA ADR on August 27, 2024 and sell it today you would earn a total of 133.00 from holding Telefonica SA ADR or generate 42.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonica SA ADR vs. Telefonica Brasil SA
Performance |
| Timeline |
| Telefonica SA ADR |
| Telefonica Brasil |
Telefonica and Telefonica Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonica and Telefonica Brasil
The main advantage of trading using opposite Telefonica and Telefonica Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica 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.| Telefonica vs. Liberty Broadband Srs | Telefonica vs. Ribbon Communications | Telefonica vs. Liberty Broadband Srs | Telefonica vs. Shenandoah Telecommunications Co |
| Telefonica Brasil vs. Liberty Broadband Srs | Telefonica Brasil vs. Ribbon Communications | Telefonica Brasil vs. Liberty Broadband Srs | Telefonica Brasil vs. Shenandoah Telecommunications Co |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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