Correlation Between Americanas and Sendas Distribuidora

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

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

Diversification Opportunities for Americanas and Sendas Distribuidora

0.07

Correlation Coefficient

Americanas  Sendas Distribuidora

Significant diversification

The 3 months correlation between Americanas and Sendas is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Americanas SA and Sendas Distribuidora SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sendas Distribuidora and Americanas 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 Americanas SA are associated (or correlated) with Sendas Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sendas Distribuidora has no effect on the direction of Americanas i.e., Americanas and Sendas Distribuidora go up and down completely randomly.

Pair Corralation between Americanas and Sendas Distribuidora

Assuming the 90 days trading horizon Americanas SA is expected to generate 1.79 times more return on investment than Sendas Distribuidora. However, Americanas is 1.79 times more volatile than Sendas Distribuidora SA. It trades about 0.18 of its potential returns per unit of risk. Sendas Distribuidora SA is currently generating about 0.16 per unit of risk. If you would invest  520.00  in Americanas SA on December 25, 2024 and sell it today you would earn a total of  331.00  from holding Americanas SA or generate 63.65% return on investment over 90 days.

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

Americanas SA  vs.  Sendas Distribuidora SA

Americanas SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Americanas SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Americanas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sendas Distribuidora

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sendas Distribuidora SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sendas Distribuidora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Americanas and Sendas Distribuidora

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

The idea behind Americanas SA and Sendas Distribuidora SA 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.