Correlation Between General Electric and Telecomunicaes Brasileiras

Can any of the company-specific risk be diversified away by investing in both General Electric and Telecomunicaes Brasileiras 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 General Electric and Telecomunicaes Brasileiras into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Electric and Telecomunicaes Brasileiras SA, you can compare the effects of market volatilities on General Electric and Telecomunicaes Brasileiras 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 General Electric with a short position of Telecomunicaes Brasileiras. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Electric and Telecomunicaes Brasileiras.

Diversification Opportunities for General Electric and Telecomunicaes Brasileiras

-0.07

Correlation Coefficient

General Electric  Telecomunicaes Brasileiras

Good diversification

The 3 months correlation between General and Telecomunicaes is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Telecomunicaes Brasileiras SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecomunicaes Brasileiras and General Electric 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 General Electric are associated (or correlated) with Telecomunicaes Brasileiras. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecomunicaes Brasileiras has no effect on the direction of General Electric i.e., General Electric and Telecomunicaes Brasileiras go up and down completely randomly.

Pair Corralation between General Electric and Telecomunicaes Brasileiras

Assuming the 90 days trading horizon General Electric is expected to generate 0.78 times more return on investment than Telecomunicaes Brasileiras. However, General Electric is 1.28 times less risky than Telecomunicaes Brasileiras. It trades about -0.07 of its potential returns per unit of risk. Telecomunicaes Brasileiras SA is currently generating about -0.18 per unit of risk. If you would invest  104,469  in General Electric on September 25, 2024 and sell it today you would lose (3,179) from holding General Electric or give up 3.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

General Electric  vs.  Telecomunicaes Brasileiras SA

General Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, General Electric is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Telecomunicaes Brasileiras

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telecomunicaes Brasileiras SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with General Electric and Telecomunicaes Brasileiras

The main advantage of trading using opposite General Electric and Telecomunicaes Brasileiras positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric position performs unexpectedly, Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras will offset losses from the drop in Telecomunicaes Brasileiras' long position.

The idea behind General Electric and Telecomunicaes Brasileiras 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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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.