Correlation Between Telecomunicaes Brasileiras and Multilaser Industrial
Can any of the company-specific risk be diversified away by investing in both Telecomunicaes Brasileiras and Multilaser Industrial 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 Multilaser Industrial 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 Multilaser Industrial SA, you can compare the effects of market volatilities on Telecomunicaes Brasileiras and Multilaser Industrial 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 Multilaser Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecomunicaes Brasileiras and Multilaser Industrial.
Diversification Opportunities for Telecomunicaes Brasileiras and Multilaser Industrial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telecomunicaes and Multilaser is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and Multilaser Industrial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multilaser Industrial 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 Multilaser Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multilaser Industrial has no effect on the direction of Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and Multilaser Industrial go up and down completely randomly.
Pair Corralation between Telecomunicaes Brasileiras and Multilaser Industrial
Assuming the 90 days trading horizon Telecomunicaes Brasileiras SA is expected to generate 0.67 times more return on investment than Multilaser Industrial. However, Telecomunicaes Brasileiras SA is 1.5 times less risky than Multilaser Industrial. It trades about -0.12 of its potential returns per unit of risk. Multilaser Industrial SA is currently generating about -0.31 per unit of risk. If you would invest 815.00 in Telecomunicaes Brasileiras SA on September 20, 2024 and sell it today you would lose (70.00) from holding Telecomunicaes Brasileiras SA or give up 8.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telecomunicaes Brasileiras SA vs. Multilaser Industrial SA
Performance |
| Timeline |
| Telecomunicaes Brasileiras |
| Multilaser Industrial |
Telecomunicaes Brasileiras and Multilaser Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telecomunicaes Brasileiras and Multilaser Industrial
The main advantage of trading using opposite Telecomunicaes Brasileiras and Multilaser Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecomunicaes Brasileiras position performs unexpectedly, Multilaser Industrial 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 Multilaser Industrial will offset losses from the drop in Multilaser Industrial's long position.The idea behind Telecomunicaes Brasileiras SA and Multilaser Industrial 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.
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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