Correlation Between Liberty Latin and Telefonica Brasil

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

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

Diversification Opportunities for Liberty Latin and Telefonica Brasil

0.84

Correlation Coefficient

Liberty Latin  Telefonica Brasil

Very poor diversification

The 3 months correlation between Liberty and Telefonica is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Latin America and Telefonica Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica Brasil and Liberty Latin 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 Liberty Latin America 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 Liberty Latin i.e., Liberty Latin and Telefonica Brasil go up and down completely randomly.

Pair Corralation between Liberty Latin and Telefonica Brasil

Assuming the 90 days horizon Liberty Latin America is expected to generate 2.14 times more return on investment than Telefonica Brasil. However, Liberty Latin is 2.14 times more volatile than Telefonica Brasil SA. It trades about 0.15 of its potential returns per unit of risk. Telefonica Brasil SA is currently generating about 0.18 per unit of risk. If you would invest  556.00  in Liberty Latin America on May 7, 2025 and sell it today you would earn a total of  170.00  from holding Liberty Latin America or generate 30.58% return on investment over 90 days.

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

Liberty Latin America  vs.  Telefonica Brasil SA

Liberty Latin America

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Latin America are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Liberty Latin disclosed solid returns over the last few months and may actually be approaching a breakup point.

Telefonica Brasil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonica Brasil SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Telefonica Brasil showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Liberty Latin and Telefonica Brasil

The main advantage of trading using opposite Liberty Latin and Telefonica Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Latin 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 Liberty Latin America 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.