Correlation Between Telefonica Brasil and America Movil

Can any of the company-specific risk be diversified away by investing in both Telefonica Brasil and America Movil 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 America Movil 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 America Movil SAB, you can compare the effects of market volatilities on Telefonica Brasil and America Movil 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 America Movil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica Brasil and America Movil.

Diversification Opportunities for Telefonica Brasil and America Movil

0.32

Correlation Coefficient

Telefonica Brasil  America Movil

Weak diversification

The 3 months correlation between Telefonica and America is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and America Movil SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on America Movil SAB 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 America Movil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of America Movil SAB has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and America Movil go up and down completely randomly.

Pair Corralation between Telefonica Brasil and America Movil

Considering the 90-day investment horizon Telefonica Brasil SA is expected to generate 1.03 times more return on investment than America Movil. However, Telefonica Brasil is 1.03 times more volatile than America Movil SAB. It trades about 0.02 of its potential returns per unit of risk. America Movil SAB is currently generating about -0.11 per unit of risk. If you would invest  879.00  in Telefonica Brasil SA on August 18, 2024 and sell it today you would earn a total of  25.00  from holding Telefonica Brasil SA or generate 2.84% return on investment over 90 days.

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

Telefonica Brasil SA  vs.  America Movil SAB

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 fairly stable forward indicators, Telefonica Brasil is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

America Movil SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days America Movil SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Telefonica Brasil and America Movil

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

The idea behind Telefonica Brasil SA and America Movil SAB 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.