Correlation Between Companhia Siderrgica and Lennar

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

By analyzing existing cross correlation between Companhia Siderrgica Nacional and Lennar, you can compare the effects of market volatilities on Companhia Siderrgica and Lennar 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 Siderrgica with a short position of Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Siderrgica and Lennar.

Diversification Opportunities for Companhia Siderrgica and Lennar

0.74

Correlation Coefficient

Companhia Siderrgica  Lennar

Poor diversification

The 3 months correlation between Companhia and Lennar is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderrgica Nacional and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Companhia Siderrgica 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 Siderrgica Nacional are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Companhia Siderrgica i.e., Companhia Siderrgica and Lennar go up and down completely randomly.

Pair Corralation between Companhia Siderrgica and Lennar

Assuming the 90 days trading horizon Companhia Siderrgica Nacional is expected to under-perform the Lennar. In addition to that, Companhia Siderrgica is 1.21 times more volatile than Lennar. It trades about -0.01 of its total potential returns per unit of risk. Lennar is currently generating about 0.07 per unit of volatility. If you would invest  55,720  in Lennar on October 3, 2024 and sell it today you would earn a total of  28,633  from holding Lennar or generate 51.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.4%
Values	Daily Returns

Companhia Siderrgica Nacional  vs.  Lennar

Companhia Siderrgica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Siderrgica Nacional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Companhia Siderrgica and Lennar

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

The idea behind Companhia Siderrgica Nacional and Lennar 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.