Correlation Between Sendas Distribuidora and Target

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

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

Diversification Opportunities for Sendas Distribuidora and Target

0.39

Correlation Coefficient

Sendas Distribuidora  Target

Weak diversification

The 3 months correlation between Sendas and Target is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sendas Distribuidora SA and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and Sendas Distribuidora 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 Sendas Distribuidora SA are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Sendas Distribuidora i.e., Sendas Distribuidora and Target go up and down completely randomly.

Pair Corralation between Sendas Distribuidora and Target

Given the investment horizon of 90 days Sendas Distribuidora SA is expected to generate 1.5 times more return on investment than Target. However, Sendas Distribuidora is 1.5 times more volatile than Target. It trades about 0.13 of its potential returns per unit of risk. Target is currently generating about -0.23 per unit of risk. If you would invest  447.00  in Sendas Distribuidora SA on December 28, 2024 and sell it today you would earn a total of  13.00  from holding Sendas Distribuidora SA or generate 2.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	14.75%
Values	Daily Returns

Sendas Distribuidora SA  vs.  Target

Sendas Distribuidora

Risk-Adjusted Performance

OK

Over the last 90 days Sendas Distribuidora SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak basic indicators, Sendas Distribuidora demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Target

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sendas Distribuidora and Target

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

The idea behind Sendas Distribuidora SA and Target 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.