Correlation Between Companhia and Springs Global

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

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

Diversification Opportunities for Companhia and Springs Global

-1.0

Correlation Coefficient

Companhia  Springs Global

Pay attention - limited upside

The 3 months correlation between Companhia and Springs is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Tecidos and Springs Global Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Springs Global Parti 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 Tecidos are associated (or correlated) with Springs Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Springs Global Parti has no effect on the direction of Companhia i.e., Companhia and Springs Global go up and down completely randomly.

Pair Corralation between Companhia and Springs Global

Assuming the 90 days trading horizon Companhia de Tecidos is expected to generate 0.7 times more return on investment than Springs Global. However, Companhia de Tecidos is 1.44 times less risky than Springs Global. It trades about -0.05 of its potential returns per unit of risk. Springs Global Participaes is currently generating about -0.07 per unit of risk. If you would invest  202.00  in Companhia de Tecidos on December 2, 2024 and sell it today you would lose (116.00) from holding Companhia de Tecidos or give up 57.43% of portfolio value over 90 days.

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

Companhia de Tecidos  vs.  Springs Global Participaes

Companhia de Tecidos

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia de Tecidos 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.

Springs Global Parti

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Companhia de Tecidos and Springs Global 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.