Correlation Between Bassac and CBO Territoria

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

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

Diversification Opportunities for Bassac and CBO Territoria

0.18

Correlation Coefficient

Bassac  CBO Territoria

Average diversification

The 3 months correlation between Bassac and CBO is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bassac and CBO Territoria SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBO Territoria SA and Bassac 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 Bassac are associated (or correlated) with CBO Territoria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBO Territoria SA has no effect on the direction of Bassac i.e., Bassac and CBO Territoria go up and down completely randomly.

Pair Corralation between Bassac and CBO Territoria

Assuming the 90 days trading horizon Bassac is expected to generate 4.64 times more return on investment than CBO Territoria. However, Bassac is 4.64 times more volatile than CBO Territoria SA. It trades about 0.23 of its potential returns per unit of risk. CBO Territoria SA is currently generating about 0.07 per unit of risk. If you would invest  4,270  in Bassac on December 28, 2024 and sell it today you would earn a total of  1,730  from holding Bassac or generate 40.52% return on investment over 90 days.

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

Bassac  vs.  CBO Territoria SA

Bassac

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bassac are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bassac sustained solid returns over the last few months and may actually be approaching a breakup point.

CBO Territoria SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CBO Territoria SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CBO Territoria is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bassac and CBO Territoria

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

The idea behind Bassac and CBO Territoria 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.