Correlation Between Companhia Tecidos and Electro Ao

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

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

Diversification Opportunities for Companhia Tecidos and Electro Ao

0.16

Correlation Coefficient

Companhia Tecidos  Electro Ao

Average diversification

The 3 months correlation between Companhia and Electro is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Tecidos Santanense and Electro Ao Altona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electro Ao Altona and Companhia Tecidos 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 Tecidos Santanense are associated (or correlated) with Electro Ao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electro Ao Altona has no effect on the direction of Companhia Tecidos i.e., Companhia Tecidos and Electro Ao go up and down completely randomly.

Pair Corralation between Companhia Tecidos and Electro Ao

Assuming the 90 days trading horizon Companhia Tecidos Santanense is expected to generate 91.81 times more return on investment than Electro Ao. However, Companhia Tecidos is 91.81 times more volatile than Electro Ao Altona. It trades about 0.31 of its potential returns per unit of risk. Electro Ao Altona is currently generating about -0.03 per unit of risk. If you would invest  600.00  in Companhia Tecidos Santanense on December 25, 2024 and sell it today you would lose (470.00) from holding Companhia Tecidos Santanense or give up 78.33% of portfolio value over 90 days.

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

Companhia Tecidos Santanense  vs.  Electro Ao Altona

Companhia Tecidos

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Tecidos Santanense are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia Tecidos unveiled solid returns over the last few months and may actually be approaching a breakup point.

Electro Ao Altona

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Companhia Tecidos Santanense and Electro Ao Altona 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.