Correlation Between Quadient and Telefonica Brasil

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

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

Diversification Opportunities for Quadient and Telefonica Brasil

-0.55

Correlation Coefficient

Quadient  Telefonica Brasil

Excellent diversification

The 3 months correlation between Quadient and Telefonica is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Quadient SA and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil and Quadient 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 Quadient SA are associated (or correlated) with Telefonica Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica Brasil has no effect on the direction of Quadient i.e., Quadient and Telefonica Brasil go up and down completely randomly.

Pair Corralation between Quadient and Telefonica Brasil

Assuming the 90 days horizon Quadient SA is expected to generate 0.98 times more return on investment than Telefonica Brasil. However, Quadient SA is 1.02 times less risky than Telefonica Brasil. It trades about 0.13 of its potential returns per unit of risk. Telefonica Brasil SA is currently generating about -0.19 per unit of risk. If you would invest  2,100  in Quadient SA on March 20, 2024 and sell it today you would earn a total of  265.00  from holding Quadient SA or generate 12.62% return on investment over 90 days.

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

Quadient SA  vs.  Telefonica Brasil SA

Quadient SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quadient SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Quadient reported solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady performance in the last few months, the Stock's forward indicators remain fairly stable which may send shares a bit higher in July 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Quadient and Telefonica Brasil

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

The idea behind Quadient SA and Telefonica Brasil 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.