Correlation Between Aurea SA and Seche Environnem

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

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

Diversification Opportunities for Aurea SA and Seche Environnem

0.66

Correlation Coefficient

Aurea SA  Seche Environnem

Poor diversification

The 3 months correlation between Aurea and Seche is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Aurea SA and Seche Environnem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seche Environnem and Aurea SA 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 Aurea SA are associated (or correlated) with Seche Environnem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seche Environnem has no effect on the direction of Aurea SA i.e., Aurea SA and Seche Environnem go up and down completely randomly.

Pair Corralation between Aurea SA and Seche Environnem

Assuming the 90 days trading horizon Aurea SA is expected to under-perform the Seche Environnem. But the stock apears to be less risky and, when comparing its historical volatility, Aurea SA is 1.69 times less risky than Seche Environnem. The stock trades about -0.02 of its potential returns per unit of risk. The Seche Environnem is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,730  in Seche Environnem on December 30, 2024 and sell it today you would lose (170.00) from holding Seche Environnem or give up 2.2% of portfolio value over 90 days.

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

Aurea SA  vs.  Seche Environnem

Aurea SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aurea SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aurea SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Seche Environnem

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seche Environnem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seche Environnem is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aurea SA and Seche Environnem

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

The idea behind Aurea SA and Seche Environnem 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.