Correlation Between Telefonica Brasil and Singapore Telecommunicatio

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

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

Diversification Opportunities for Telefonica Brasil and Singapore Telecommunicatio

0.66

Correlation Coefficient

Telefonica Brasil  Singapore Telecommunicatio

Poor diversification

The 3 months correlation between Telefonica and Singapore is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and Singapore Telecommunications L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Telecommunicatio and Telefonica Brasil 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 Telefonica Brasil SA are associated (or correlated) with Singapore Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Telecommunicatio has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and Singapore Telecommunicatio go up and down completely randomly.

Pair Corralation between Telefonica Brasil and Singapore Telecommunicatio

Considering the 90-day investment horizon Telefonica Brasil SA is expected to under-perform the Singapore Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Telefonica Brasil SA is 1.57 times less risky than Singapore Telecommunicatio. The stock trades about -0.14 of its potential returns per unit of risk. The Singapore Telecommunications Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  240.00  in Singapore Telecommunications Limited on September 5, 2024 and sell it today you would lose (17.00) from holding Singapore Telecommunications Limited or give up 7.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Telefonica Brasil SA  vs.  Singapore Telecommunications L

Telefonica Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonica Brasil 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 Stock's forward indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Singapore Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Telecommunications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Singapore Telecommunicatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Telefonica Brasil and Singapore Telecommunicatio

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

The idea behind Telefonica Brasil SA and Singapore Telecommunications Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.