Correlation Between Telefonica Brasil and Vodafone Group
Can any of the company-specific risk be diversified away by investing in both Telefonica Brasil and Vodafone Group 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 Brasil and Vodafone Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonica Brasil SA and Vodafone Group PLC, you can compare the effects of market volatilities on Telefonica Brasil and Vodafone Group 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 Brasil with a short position of Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica Brasil and Vodafone Group.
Diversification Opportunities for Telefonica Brasil and Vodafone Group
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Telefonica and Vodafone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC and Telefonica Brasil 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 Brasil SA are associated (or correlated) with Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and Vodafone Group go up and down completely randomly.
Pair Corralation between Telefonica Brasil and Vodafone Group
Considering the 90-day investment horizon Telefonica Brasil SA is expected to under-perform the Vodafone Group. But the stock apears to be less risky and, when comparing its historical volatility, Telefonica Brasil SA is 1.3 times less risky than Vodafone Group. The stock trades about -0.25 of its potential returns per unit of risk. The Vodafone Group PLC is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 93.00 in Vodafone Group PLC on September 1, 2024 and sell it today you would lose (5.00) from holding Vodafone Group PLC or give up 5.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonica Brasil SA vs. Vodafone Group PLC
Performance |
| Timeline |
| Telefonica Brasil |
| Vodafone Group PLC |
Telefonica Brasil and Vodafone Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonica Brasil and Vodafone Group
The main advantage of trading using opposite Telefonica Brasil and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica Brasil position performs unexpectedly, Vodafone Group 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 Vodafone Group will offset losses from the drop in Vodafone Group's long position.| Telefonica Brasil vs. Orange SA ADR | Telefonica Brasil vs. Vodafone Group PLC | Telefonica Brasil vs. Grupo Televisa SAB | Telefonica Brasil vs. America Movil SAB |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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