Correlation Between Telefonica Brasil and KT

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

Diversification Opportunities for Telefonica Brasil and KT

-0.63

Correlation Coefficient

Telefonica Brasil  KT

Excellent diversification

The 3 months correlation between Telefonica and KT is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica Brasil SA and KT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KT Corporation 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 KT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KT Corporation has no effect on the direction of Telefonica Brasil i.e., Telefonica Brasil and KT go up and down completely randomly.

Pair Corralation between Telefonica Brasil and KT

Considering the 90-day investment horizon Telefonica Brasil is expected to generate 1.01 times less return on investment than KT. In addition to that, Telefonica Brasil is 1.1 times more volatile than KT Corporation. It trades about 0.04 of its total potential returns per unit of risk. KT Corporation is currently generating about 0.04 per unit of volatility. If you would invest  1,214  in KT Corporation on September 24, 2024 and sell it today you would earn a total of  391.00  from holding KT Corporation or generate 32.21% return on investment over 90 days.

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

Telefonica Brasil SA  vs.  KT Corp.

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 weak performance in the last few months, the Stock's forward indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

KT Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KT Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, KT is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Telefonica Brasil and KT

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

The idea behind Telefonica Brasil SA and KT Corporation 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.