Correlation Between Telefnica and Oi SA
Can any of the company-specific risk be diversified away by investing in both Telefnica and Oi SA 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 Telefnica and Oi SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefnica SA and Oi SA, you can compare the effects of market volatilities on Telefnica and Oi SA 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 Telefnica with a short position of Oi SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefnica and Oi SA.
Diversification Opportunities for Telefnica and Oi SA
Weak diversification
The 3 months correlation between Telefnica and OIBR3 is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica SA and Oi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oi SA and Telefnica 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 Telefnica SA are associated (or correlated) with Oi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oi SA has no effect on the direction of Telefnica i.e., Telefnica and Oi SA go up and down completely randomly.
Pair Corralation between Telefnica and Oi SA
Assuming the 90 days trading horizon Telefnica is expected to generate 112.25 times less return on investment than Oi SA. But when comparing it to its historical volatility, Telefnica SA is 70.45 times less risky than Oi SA. It trades about 0.07 of its potential returns per unit of risk. Oi SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,900 in Oi SA on August 28, 2024 and sell it today you would lose (1,743) from holding Oi SA or give up 91.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefnica SA vs. Oi SA
Performance |
| Timeline |
| Telefnica SA |
| Oi SA |
Telefnica and Oi SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefnica and Oi SA
The main advantage of trading using opposite Telefnica and Oi SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefnica position performs unexpectedly, Oi SA 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 Oi SA will offset losses from the drop in Oi SA's long position.The idea behind Telefnica SA and Oi 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.| Oi SA vs. IRB Brasil Resseguros SA | Oi SA vs. Magazine Luiza SA | Oi SA vs. Cogna Educao SA | Oi SA vs. Oi 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |