Correlation Between Recrusul and Telecomunicaes Brasileiras

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

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

Diversification Opportunities for Recrusul and Telecomunicaes Brasileiras

-0.31

Correlation Coefficient

Recrusul  Telecomunicaes Brasileiras

Very good diversification

The 3 months correlation between Recrusul and Telecomunicaes is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Recrusul SA and Telecomunicaes Brasileiras SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecomunicaes Brasileiras and Recrusul 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 Recrusul SA 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 Recrusul i.e., Recrusul and Telecomunicaes Brasileiras go up and down completely randomly.

Pair Corralation between Recrusul and Telecomunicaes Brasileiras

Assuming the 90 days trading horizon Recrusul SA is expected to under-perform the Telecomunicaes Brasileiras. In addition to that, Recrusul is 2.47 times more volatile than Telecomunicaes Brasileiras SA. It trades about -0.33 of its total potential returns per unit of risk. Telecomunicaes Brasileiras SA is currently generating about -0.19 per unit of volatility. If you would invest  818.00  in Telecomunicaes Brasileiras SA on September 24, 2024 and sell it today you would lose (79.00) from holding Telecomunicaes Brasileiras SA or give up 9.66% of portfolio value over 90 days.

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

Recrusul SA  vs.  Telecomunicaes Brasileiras SA

Recrusul SA

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Recrusul SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Recrusul unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Recrusul and Telecomunicaes Brasileiras

The main advantage of trading using opposite Recrusul and Telecomunicaes Brasileiras positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Recrusul 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 Recrusul SA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.