Correlation Between Telecomunicaes Brasileiras and American Tower

Can any of the company-specific risk be diversified away by investing in both Telecomunicaes Brasileiras and American Tower 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 American Tower 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 American Tower, you can compare the effects of market volatilities on Telecomunicaes Brasileiras and American Tower 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 American Tower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecomunicaes Brasileiras and American Tower.

Diversification Opportunities for Telecomunicaes Brasileiras and American Tower

0.58

Correlation Coefficient

Telecomunicaes Brasileiras  American Tower

Very weak diversification

The 3 months correlation between Telecomunicaes and American is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Telecomunicaes Brasileiras SA and American Tower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Tower 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 American Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Tower has no effect on the direction of Telecomunicaes Brasileiras i.e., Telecomunicaes Brasileiras and American Tower go up and down completely randomly.

Pair Corralation between Telecomunicaes Brasileiras and American Tower

Assuming the 90 days trading horizon Telecomunicaes Brasileiras SA is expected to under-perform the American Tower. In addition to that, Telecomunicaes Brasileiras is 1.01 times more volatile than American Tower. It trades about -0.18 of its total potential returns per unit of risk. American Tower is currently generating about -0.03 per unit of volatility. If you would invest  5,198  in American Tower on September 26, 2024 and sell it today you would lose (310.00) from holding American Tower or give up 5.96% of portfolio value over 90 days.

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

Telecomunicaes Brasileiras SA  vs.  American Tower

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.

American Tower

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Telecomunicaes Brasileiras and American Tower

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

The idea behind Telecomunicaes Brasileiras SA and American Tower 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.