Correlation Between Companhia and Companhia Tecidos

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

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

Diversification Opportunities for Companhia and Companhia Tecidos

-0.1

Correlation Coefficient

Companhia  Companhia Tecidos

Good diversification

The 3 months correlation between Companhia and Companhia is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Fiacao and Companhia Tecidos Santanense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Tecidos and Companhia 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 Companhia de Fiacao are associated (or correlated) with Companhia Tecidos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Tecidos has no effect on the direction of Companhia i.e., Companhia and Companhia Tecidos go up and down completely randomly.

Pair Corralation between Companhia and Companhia Tecidos

Assuming the 90 days trading horizon Companhia de Fiacao is expected to under-perform the Companhia Tecidos. But the stock apears to be less risky and, when comparing its historical volatility, Companhia de Fiacao is 2.04 times less risky than Companhia Tecidos. The stock trades about -0.07 of its potential returns per unit of risk. The Companhia Tecidos Santanense is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  80.00  in Companhia Tecidos Santanense on December 30, 2024 and sell it today you would lose (7.00) from holding Companhia Tecidos Santanense or give up 8.75% of portfolio value over 90 days.

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

Companhia de Fiacao  vs.  Companhia Tecidos Santanense

Companhia de Fiacao

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia de Fiacao has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Companhia Tecidos

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia Tecidos Santanense has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Companhia Tecidos is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Companhia and Companhia Tecidos

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

The idea behind Companhia de Fiacao and Companhia Tecidos Santanense 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.