Correlation Between Clover Health and Santos Brasil

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

By analyzing existing cross correlation between Clover Health Investments, and Santos Brasil Participaes, you can compare the effects of market volatilities on Clover Health and Santos Brasil 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 Clover Health with a short position of Santos Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clover Health and Santos Brasil.

Diversification Opportunities for Clover Health and Santos Brasil

0.06

Correlation Coefficient

Clover Health  Santos Brasil

Significant diversification

The 3 months correlation between Clover and Santos is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Clover Health Investments, and Santos Brasil Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos Brasil Participaes and Clover Health 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 Clover Health Investments, are associated (or correlated) with Santos Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos Brasil Participaes has no effect on the direction of Clover Health i.e., Clover Health and Santos Brasil go up and down completely randomly.

Pair Corralation between Clover Health and Santos Brasil

Assuming the 90 days trading horizon Clover Health Investments, is expected to generate 1.25 times more return on investment than Santos Brasil. However, Clover Health is 1.25 times more volatile than Santos Brasil Participaes. It trades about 0.08 of its potential returns per unit of risk. Santos Brasil Participaes is currently generating about 0.05 per unit of risk. If you would invest  673.00  in Clover Health Investments, on October 25, 2024 and sell it today you would earn a total of  2,102  from holding Clover Health Investments, or generate 312.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

Clover Health Investments,  vs.  Santos Brasil Participaes

Clover Health Invest

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Health Investments, are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clover Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Santos Brasil Participaes

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Santos Brasil Participaes are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Santos Brasil is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Clover Health and Santos Brasil

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

The idea behind Clover Health Investments, and Santos Brasil Participaes 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.