Correlation Between Castro and Shufersal

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

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

Diversification Opportunities for Castro and Shufersal

-0.33

Correlation Coefficient

Castro  Shufersal

Very good diversification

The 3 months correlation between Castro and Shufersal is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Castro and Shufersal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shufersal and Castro 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 Castro are associated (or correlated) with Shufersal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shufersal has no effect on the direction of Castro i.e., Castro and Shufersal go up and down completely randomly.

Pair Corralation between Castro and Shufersal

Assuming the 90 days trading horizon Castro is expected to generate 2.01 times more return on investment than Shufersal. However, Castro is 2.01 times more volatile than Shufersal. It trades about 0.28 of its potential returns per unit of risk. Shufersal is currently generating about -0.06 per unit of risk. If you would invest  916,293  in Castro on December 30, 2024 and sell it today you would earn a total of  455,707  from holding Castro or generate 49.73% return on investment over 90 days.

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

Castro  vs.  Shufersal

Castro

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Castro are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Castro sustained solid returns over the last few months and may actually be approaching a breakup point.

Shufersal

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Castro and Shufersal

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

The idea behind Castro and Shufersal 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.