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

0.85

Correlation Coefficient

Telefonica Brasil  KT

Very poor diversification

The 3 months correlation between Telefonica and KT is 0.85. 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 SA is expected to generate 0.98 times more return on investment than KT. However, Telefonica Brasil SA is 1.02 times less risky than KT. It trades about -0.02 of its potential returns per unit of risk. KT Corporation is currently generating about -0.12 per unit of risk. If you would invest  1,004  in Telefonica Brasil SA on February 4, 2024 and sell it today you would lose (9.00) from holding Telefonica Brasil SA or give up 0.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
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 fairly stable forward indicators, Telefonica Brasil is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

KT Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KT Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.