Correlation Between Telecomunicaes Brasileiras and Costco Wholesale

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

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

Diversification Opportunities for Telecomunicaes Brasileiras and Costco Wholesale

-0.87

Correlation Coefficient

Telecomunicaes Brasileiras  Costco Wholesale

Pay attention - limited upside

The 3 months correlation between Telecomunicaes and Costco is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale and Telecomunicaes Brasileiras 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 Telecomunicaes Brasileiras SA are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and Costco Wholesale go up and down completely randomly.

Pair Corralation between Telecomunicaes Brasileiras and Costco Wholesale

Assuming the 90 days trading horizon Telecomunicaes Brasileiras SA is expected to under-perform the Costco Wholesale. In addition to that, Telecomunicaes Brasileiras is 1.67 times more volatile than Costco Wholesale. It trades about -0.19 of its total potential returns per unit of risk. Costco Wholesale is currently generating about 0.43 per unit of volatility. If you would invest  12,880  in Costco Wholesale on September 4, 2024 and sell it today you would earn a total of  2,045  from holding Costco Wholesale or generate 15.88% return on investment over 90 days.

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

Telecomunicaes Brasileiras SA  vs.  Costco Wholesale

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.

Costco Wholesale

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Costco Wholesale sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecomunicaes Brasileiras and Costco Wholesale

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

The idea behind Telecomunicaes Brasileiras SA and Costco Wholesale 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..