Correlation Between Centro De and Profarma Distribuidora

Can any of the company-specific risk be diversified away by investing in both Centro De and Profarma Distribuidora 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 Centro De and Profarma Distribuidora into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Centro de Imagem and Profarma Distribuidora de, you can compare the effects of market volatilities on Centro De and Profarma Distribuidora 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 Centro De with a short position of Profarma Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centro De and Profarma Distribuidora.

Diversification Opportunities for Centro De and Profarma Distribuidora

0.52

Correlation Coefficient

Centro De  Profarma Distribuidora

Very weak diversification

The 3 months correlation between Centro and Profarma is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Centro de Imagem and Profarma Distribuidora de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profarma Distribuidora and Centro De 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 Centro de Imagem are associated (or correlated) with Profarma Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profarma Distribuidora has no effect on the direction of Centro De i.e., Centro De and Profarma Distribuidora go up and down completely randomly.

Pair Corralation between Centro De and Profarma Distribuidora

Assuming the 90 days trading horizon Centro de Imagem is expected to under-perform the Profarma Distribuidora. In addition to that, Centro De is 2.21 times more volatile than Profarma Distribuidora de. It trades about -0.01 of its total potential returns per unit of risk. Profarma Distribuidora de is currently generating about 0.1 per unit of volatility. If you would invest  649.00  in Profarma Distribuidora de on December 29, 2024 and sell it today you would earn a total of  83.00  from holding Profarma Distribuidora de or generate 12.79% return on investment over 90 days.

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

Centro de Imagem  vs.  Profarma Distribuidora de

Centro de Imagem

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centro de Imagem has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Centro De is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Profarma Distribuidora

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Profarma Distribuidora de are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Profarma Distribuidora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centro De and Profarma Distribuidora

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

The idea behind Centro de Imagem and Profarma Distribuidora de 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.