Correlation Between Telefnica Brasil and Engie Brasil

Can any of the company-specific risk be diversified away by investing in both Telefnica Brasil and Engie 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 Telefnica Brasil and Engie Brasil 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 Engie Brasil Energia, you can compare the effects of market volatilities on Telefnica Brasil and Engie 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 Telefnica Brasil with a short position of Engie Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefnica Brasil and Engie Brasil.

Diversification Opportunities for Telefnica Brasil and Engie Brasil

0.47

Correlation Coefficient

Telefnica Brasil  Engie Brasil

Very weak diversification

The 3 months correlation between Telefnica and Engie is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Telefnica Brasil SA and Engie Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie Brasil Energia 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 Engie Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie Brasil Energia has no effect on the direction of Telefnica Brasil i.e., Telefnica Brasil and Engie Brasil go up and down completely randomly.

Pair Corralation between Telefnica Brasil and Engie Brasil

Assuming the 90 days trading horizon Telefnica Brasil SA is expected to under-perform the Engie Brasil. In addition to that, Telefnica Brasil is 1.01 times more volatile than Engie Brasil Energia. It trades about -0.01 of its total potential returns per unit of risk. Engie Brasil Energia is currently generating about 0.06 per unit of volatility. If you would invest  4,072  in Engie Brasil Energia on February 3, 2024 and sell it today you would earn a total of  77.00  from holding Engie Brasil Energia or generate 1.89% return on investment over 90 days.

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

Telefnica Brasil SA  vs.  Engie Brasil Energia

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 comparatively stable basic indicators, Telefnica Brasil is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Engie Brasil Energia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Engie Brasil Energia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Engie Brasil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Telefnica Brasil and Engie Brasil

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

The idea behind Telefnica Brasil SA and Engie Brasil Energia 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.