Correlation Between Companhia and Hrcules SA

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

By analyzing existing cross correlation between Companhia de Gs and Hrcules SA , you can compare the effects of market volatilities on Companhia and Hrcules 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 Hrcules SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Hrcules SA.

Diversification Opportunities for Companhia and Hrcules SA

-0.15

Correlation Coefficient

Companhia  Hrcules SA

Good diversification

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

Pair Corralation between Companhia and Hrcules SA

Assuming the 90 days trading horizon Companhia de Gs is expected to generate 0.61 times more return on investment than Hrcules SA. However, Companhia de Gs is 1.63 times less risky than Hrcules SA. It trades about 0.03 of its potential returns per unit of risk. Hrcules SA is currently generating about 0.0 per unit of risk. If you would invest  12,163  in Companhia de Gs on October 10, 2024 and sell it today you would earn a total of  239.00  from holding Companhia de Gs or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Companhia de Gs  vs.  Hrcules SA

Companhia de Gs

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Gs are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Companhia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Hrcules SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Companhia de Gs and Hrcules 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.