Correlation Between Oi SA and Telefnica

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

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

Diversification Opportunities for Oi SA and Telefnica

0.19

Correlation Coefficient

Oi SA  Telefnica

Average diversification

The 3 months correlation between OIBR3 and Telefnica is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Oi SA and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA and Oi SA 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 Oi SA are associated (or correlated) with Telefnica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica SA has no effect on the direction of Oi SA i.e., Oi SA and Telefnica go up and down completely randomly.

Pair Corralation between Oi SA and Telefnica

Assuming the 90 days trading horizon Oi SA is expected to under-perform the Telefnica. In addition to that, Oi SA is 5.91 times more volatile than Telefnica SA. It trades about -0.09 of its total potential returns per unit of risk. Telefnica SA is currently generating about -0.03 per unit of volatility. If you would invest  2,597  in Telefnica SA on September 24, 2024 and sell it today you would lose (143.00) from holding Telefnica SA or give up 5.51% of portfolio value over 90 days.

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

Oi SA  vs.  Telefnica SA

Oi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oi SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the 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.

Telefnica SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Oi SA and Telefnica

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

The idea behind Oi SA and Telefnica 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 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.