Correlation Between Companhia and Whirlpool

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

Diversification Opportunities for Companhia and Whirlpool

-0.27

Correlation Coefficient

Companhia  Whirlpool

Very good diversification

The 3 months correlation between Companhia and Whirlpool is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Gs and Whirlpool SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool 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 Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool SA has no effect on the direction of Companhia i.e., Companhia and Whirlpool go up and down completely randomly.

Pair Corralation between Companhia and Whirlpool

Assuming the 90 days trading horizon Companhia de Gs is expected to under-perform the Whirlpool. But the preferred stock apears to be less risky and, when comparing its historical volatility, Companhia de Gs is 1.19 times less risky than Whirlpool. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Whirlpool SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  421.00  in Whirlpool SA on September 23, 2024 and sell it today you would lose (6.00) from holding Whirlpool SA or give up 1.43% of portfolio value over 90 days.

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

Companhia de Gs  vs.  Whirlpool 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.

Whirlpool SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Companhia de Gs and Whirlpool 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.