Correlation Between BB Seguridade and Lojas Renner

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

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

Diversification Opportunities for BB Seguridade and Lojas Renner

-0.23

Correlation Coefficient

BB Seguridade  Lojas Renner

Very good diversification

The 3 months correlation between BBSEY and Lojas is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding BB Seguridade Participacoes and Lojas Renner SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lojas Renner SA and BB Seguridade 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 BB Seguridade Participacoes are associated (or correlated) with Lojas Renner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lojas Renner SA has no effect on the direction of BB Seguridade i.e., BB Seguridade and Lojas Renner go up and down completely randomly.

Pair Corralation between BB Seguridade and Lojas Renner

Assuming the 90 days horizon BB Seguridade is expected to generate 1.93 times less return on investment than Lojas Renner. But when comparing it to its historical volatility, BB Seguridade Participacoes is 2.56 times less risky than Lojas Renner. It trades about 0.02 of its potential returns per unit of risk. Lojas Renner SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  416.00  in Lojas Renner SA on October 23, 2024 and sell it today you would lose (5.00) from holding Lojas Renner SA or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	24.29%
Values	Daily Returns

BB Seguridade Participacoes  vs.  Lojas Renner SA

BB Seguridade Partic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BB Seguridade Participacoes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, BB Seguridade may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lojas Renner SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BB Seguridade and Lojas Renner

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

The idea behind BB Seguridade Participacoes and Lojas Renner 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.