Correlation Between BrasilAgro Companhia and Aura Minerals

Can any of the company-specific risk be diversified away by investing in both BrasilAgro Companhia and Aura Minerals 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 BrasilAgro Companhia and Aura Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BrasilAgro Companhia and Aura Minerals, you can compare the effects of market volatilities on BrasilAgro Companhia and Aura Minerals 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 BrasilAgro Companhia with a short position of Aura Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of BrasilAgro Companhia and Aura Minerals.

Diversification Opportunities for BrasilAgro Companhia and Aura Minerals

-0.35

Correlation Coefficient

BrasilAgro Companhia  Aura Minerals

Very good diversification

The 3 months correlation between BrasilAgro and Aura is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding BrasilAgro Companhia and Aura Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Minerals and BrasilAgro Companhia 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 BrasilAgro Companhia are associated (or correlated) with Aura Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Minerals has no effect on the direction of BrasilAgro Companhia i.e., BrasilAgro Companhia and Aura Minerals go up and down completely randomly.

Pair Corralation between BrasilAgro Companhia and Aura Minerals

Assuming the 90 days trading horizon BrasilAgro Companhia is expected to under-perform the Aura Minerals. But the stock apears to be less risky and, when comparing its historical volatility, BrasilAgro Companhia is 1.54 times less risky than Aura Minerals. The stock trades about -0.03 of its potential returns per unit of risk. The Aura Minerals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,290  in Aura Minerals on October 20, 2024 and sell it today you would earn a total of  250.00  from holding Aura Minerals or generate 10.92% return on investment over 90 days.

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

BrasilAgro Companhia  vs.  Aura Minerals

BrasilAgro Companhia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aura Minerals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Minerals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Aura Minerals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BrasilAgro Companhia and Aura Minerals

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

The idea behind BrasilAgro Companhia and Aura Minerals 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.