Correlation Between B3 SA and Morningstar

Can any of the company-specific risk be diversified away by investing in both B3 SA and Morningstar 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 B3 SA and Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between B3 SA and Morningstar, you can compare the effects of market volatilities on B3 SA and Morningstar 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 B3 SA with a short position of Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of B3 SA and Morningstar.

Diversification Opportunities for B3 SA and Morningstar

-0.72

Correlation Coefficient

B3 SA  Morningstar

Pay attention - limited upside

The 3 months correlation between BOLSY and Morningstar is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding B3 SA and Morningstar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar and B3 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 B3 SA are associated (or correlated) with Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar has no effect on the direction of B3 SA i.e., B3 SA and Morningstar go up and down completely randomly.

Pair Corralation between B3 SA and Morningstar

Assuming the 90 days horizon B3 SA is expected to under-perform the Morningstar. In addition to that, B3 SA is 1.78 times more volatile than Morningstar. It trades about -0.06 of its total potential returns per unit of risk. Morningstar is currently generating about 0.06 per unit of volatility. If you would invest  28,324  in Morningstar on September 27, 2024 and sell it today you would earn a total of  5,753  from holding Morningstar or generate 20.31% return on investment over 90 days.

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

B3 SA   vs.  Morningstar

B3 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days B3 SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Morningstar

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Morningstar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with B3 SA and Morningstar

The main advantage of trading using opposite B3 SA and Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B3 SA position performs unexpectedly, Morningstar 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 Morningstar will offset losses from the drop in Morningstar's long position.

The idea behind B3 SA and Morningstar 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.