Correlation Between Companhia Tecidos and Tupy SA

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

Diversification Opportunities for Companhia Tecidos and Tupy SA

0.21

Correlation Coefficient

Companhia Tecidos  Tupy SA

Modest diversification

The 3 months correlation between Companhia and Tupy is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Tecidos Santanense and Tupy SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tupy SA 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 Tupy SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tupy SA has no effect on the direction of Companhia Tecidos i.e., Companhia Tecidos and Tupy SA go up and down completely randomly.

Pair Corralation between Companhia Tecidos and Tupy SA

Assuming the 90 days trading horizon Companhia Tecidos Santanense is expected to generate 49.86 times more return on investment than Tupy SA. However, Companhia Tecidos is 49.86 times more volatile than Tupy SA. It trades about 0.31 of its potential returns per unit of risk. Tupy SA is currently generating about -0.08 per unit of risk. If you would invest  604.00  in Companhia Tecidos Santanense on December 23, 2024 and sell it today you would lose (475.00) from holding Companhia Tecidos Santanense or give up 78.64% of portfolio value over 90 days.

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

Companhia Tecidos Santanense  vs.  Tupy SA

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.

Tupy SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tupy SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Companhia Tecidos and Tupy SA

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

The idea behind Companhia Tecidos Santanense and Tupy 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.