Correlation Between Companhia and Dhler SA

Can any of the company-specific risk be diversified away by investing in both Companhia and Dhler SA 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 Dhler SA 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 Dhler SA, you can compare the effects of market volatilities on Companhia and Dhler SA 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 Dhler SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Dhler SA.

Diversification Opportunities for Companhia and Dhler SA

-0.15

Correlation Coefficient

Companhia  Dhler SA

Good diversification

The 3 months correlation between Companhia and Dhler is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Fiacao and Dhler SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dhler SA 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 Dhler SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dhler SA has no effect on the direction of Companhia i.e., Companhia and Dhler SA go up and down completely randomly.

Pair Corralation between Companhia and Dhler SA

Assuming the 90 days trading horizon Companhia de Fiacao is expected to generate 2.31 times more return on investment than Dhler SA. However, Companhia is 2.31 times more volatile than Dhler SA. It trades about 0.01 of its potential returns per unit of risk. Dhler SA is currently generating about -0.06 per unit of risk. If you would invest  2,800  in Companhia de Fiacao on September 24, 2024 and sell it today you would lose (130.00) from holding Companhia de Fiacao or give up 4.64% 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.  Dhler SA

Companhia de Fiacao

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Fiacao are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dhler SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhler SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dhler SA 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 Dhler SA

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

The idea behind Companhia de Fiacao and Dhler 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.