Correlation Between GAEC Educacao and PBG SA

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

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

Diversification Opportunities for GAEC Educacao and PBG SA

0.8

Correlation Coefficient

GAEC Educacao  PBG SA

Very poor diversification

The 3 months correlation between GAEC and PBG is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding GAEC Educacao SA and PBG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBG SA and GAEC Educacao 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 GAEC Educacao SA are associated (or correlated) with PBG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBG SA has no effect on the direction of GAEC Educacao i.e., GAEC Educacao and PBG SA go up and down completely randomly.

Pair Corralation between GAEC Educacao and PBG SA

Assuming the 90 days trading horizon GAEC Educacao SA is expected to under-perform the PBG SA. In addition to that, GAEC Educacao is 1.38 times more volatile than PBG SA. It trades about -0.34 of its total potential returns per unit of risk. PBG SA is currently generating about -0.25 per unit of volatility. If you would invest  398.00  in PBG SA on October 6, 2024 and sell it today you would lose (62.00) from holding PBG SA or give up 15.58% of portfolio value over 90 days.

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

GAEC Educacao SA  vs.  PBG SA

GAEC Educacao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAEC Educacao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

PBG SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PBG SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GAEC Educacao and PBG SA

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

The idea behind GAEC Educacao SA and PBG 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.