Correlation Between Telefnica Brasil and Cable One

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

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

Diversification Opportunities for Telefnica Brasil and Cable One

-0.78

Correlation Coefficient

Telefnica Brasil  Cable One

Pay attention - limited upside

The 3 months correlation between Telefnica and Cable is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica Brasil SA and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One and Telefnica 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 Telefnica Brasil SA are associated (or correlated) with Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of Telefnica Brasil i.e., Telefnica Brasil and Cable One go up and down completely randomly.

Pair Corralation between Telefnica Brasil and Cable One

Assuming the 90 days trading horizon Telefnica Brasil SA is expected to under-perform the Cable One. But the stock apears to be less risky and, when comparing its historical volatility, Telefnica Brasil SA is 1.72 times less risky than Cable One. The stock trades about -0.08 of its potential returns per unit of risk. The Cable One is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  987.00  in Cable One on September 3, 2024 and sell it today you would earn a total of  257.00  from holding Cable One or generate 26.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Telefnica Brasil SA  vs.  Cable One

Telefnica Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefnica Brasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cable One

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cable One sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefnica Brasil and Cable One

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

The idea behind Telefnica Brasil SA and Cable One 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.