Correlation Between CCR SA and Localiza Rent

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

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

Diversification Opportunities for CCR SA and Localiza Rent

0.02

Correlation Coefficient

CCR SA  Localiza Rent

Significant diversification

The 3 months correlation between CCR and Localiza is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding CCR SA and Localiza Rent a in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Localiza Rent a and CCR 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 CCR SA are associated (or correlated) with Localiza Rent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Localiza Rent a has no effect on the direction of CCR SA i.e., CCR SA and Localiza Rent go up and down completely randomly.

Pair Corralation between CCR SA and Localiza Rent

Assuming the 90 days trading horizon CCR SA is expected to generate 0.61 times more return on investment than Localiza Rent. However, CCR SA is 1.64 times less risky than Localiza Rent. It trades about 0.16 of its potential returns per unit of risk. Localiza Rent a is currently generating about 0.06 per unit of risk. If you would invest  1,017  in CCR SA on December 30, 2024 and sell it today you would earn a total of  173.00  from holding CCR SA or generate 17.01% return on investment over 90 days.

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

CCR SA  vs.  Localiza Rent a

CCR SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CCR SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CCR SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Localiza Rent a

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Localiza Rent a are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Localiza Rent may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CCR SA and Localiza Rent

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

The idea behind CCR SA and Localiza Rent a 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.