Correlation Between Companhia and Marcopolo

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

Diversification Opportunities for Companhia and Marcopolo

0.48

Correlation Coefficient

Companhia  Marcopolo

Very weak diversification

The 3 months correlation between Companhia and Marcopolo is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Gs and Marcopolo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marcopolo 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 Marcopolo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marcopolo SA has no effect on the direction of Companhia i.e., Companhia and Marcopolo go up and down completely randomly.

Pair Corralation between Companhia and Marcopolo

Assuming the 90 days trading horizon Companhia is expected to generate 2.45 times less return on investment than Marcopolo. In addition to that, Companhia is 1.42 times more volatile than Marcopolo SA. It trades about 0.03 of its total potential returns per unit of risk. Marcopolo SA is currently generating about 0.1 per unit of volatility. If you would invest  191.00  in Marcopolo SA on September 23, 2024 and sell it today you would earn a total of  566.00  from holding Marcopolo SA or generate 296.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.6%
Values	Daily Returns

Companhia de Gs  vs.  Marcopolo SA

Companhia de Gs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia de Gs has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Marcopolo SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Companhia de Gs and Marcopolo 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.