Correlation Between Bicicletas Monark and GAEC Educacao

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

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

Diversification Opportunities for Bicicletas Monark and GAEC Educacao

-0.67

Correlation Coefficient

Bicicletas Monark  GAEC Educacao

Excellent diversification

The 3 months correlation between Bicicletas and GAEC is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bicicletas Monark SA and GAEC Educacao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAEC Educacao SA and Bicicletas Monark 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 Bicicletas Monark SA are associated (or correlated) with GAEC Educacao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAEC Educacao SA has no effect on the direction of Bicicletas Monark i.e., Bicicletas Monark and GAEC Educacao go up and down completely randomly.

Pair Corralation between Bicicletas Monark and GAEC Educacao

Assuming the 90 days trading horizon Bicicletas Monark SA is expected to generate 0.59 times more return on investment than GAEC Educacao. However, Bicicletas Monark SA is 1.69 times less risky than GAEC Educacao. It trades about 0.01 of its potential returns per unit of risk. GAEC Educacao SA is currently generating about -0.02 per unit of risk. If you would invest  31,789  in Bicicletas Monark SA on October 3, 2024 and sell it today you would earn a total of  511.00  from holding Bicicletas Monark SA or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.73%
Values	Daily Returns

Bicicletas Monark SA  vs.  GAEC Educacao SA

Bicicletas Monark

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bicicletas Monark SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bicicletas Monark is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Bicicletas Monark and GAEC Educacao

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

The idea behind Bicicletas Monark SA and GAEC Educacao 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..