Correlation Between Telecomunicaes Brasileiras and GP Investments
Can any of the company-specific risk be diversified away by investing in both Telecomunicaes Brasileiras and GP Investments 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 Telecomunicaes Brasileiras and GP Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telecomunicaes Brasileiras SA and GP Investments, you can compare the effects of market volatilities on Telecomunicaes Brasileiras and GP Investments 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 Telecomunicaes Brasileiras with a short position of GP Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecomunicaes Brasileiras and GP Investments.
Diversification Opportunities for Telecomunicaes Brasileiras and GP Investments
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Telecomunicaes and GPIV33 is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments and Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras SA are associated (or correlated) with GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and GP Investments go up and down completely randomly.
Pair Corralation between Telecomunicaes Brasileiras and GP Investments
Assuming the 90 days trading horizon Telecomunicaes Brasileiras is expected to generate 3.26 times less return on investment than GP Investments. In addition to that, Telecomunicaes Brasileiras is 1.23 times more volatile than GP Investments. It trades about 0.01 of its total potential returns per unit of risk. GP Investments is currently generating about 0.05 per unit of volatility. If you would invest 259.00 in GP Investments on August 27, 2024 and sell it today you would earn a total of 139.00 from holding GP Investments or generate 53.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.9% |
| Values | Daily Returns |
Telecomunicaes Brasileiras SA vs. GP Investments
Performance |
| Timeline |
| Telecomunicaes Brasileiras |
| GP Investments |
Telecomunicaes Brasileiras and GP Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telecomunicaes Brasileiras and GP Investments
The main advantage of trading using opposite Telecomunicaes Brasileiras and GP Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecomunicaes Brasileiras position performs unexpectedly, GP Investments 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 GP Investments will offset losses from the drop in GP Investments' long position.The idea behind Telecomunicaes Brasileiras SA and GP Investments 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.| GP Investments vs. Fras le SA | GP Investments vs. Clave Indices De | GP Investments vs. BTG Pactual Logstica | GP Investments vs. Telefonaktiebolaget LM Ericsson |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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