Correlation Between Companhia Tecidos and Companhia Tecidos

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

Diversification Opportunities for Companhia Tecidos and Companhia Tecidos

0.89

Correlation Coefficient

Companhia Tecidos  Companhia Tecidos

Very poor diversification

The 3 months correlation between Companhia and Companhia is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Tecidos Santanense and Companhia Tecidos Santanense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Tecidos 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 Companhia Tecidos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Tecidos has no effect on the direction of Companhia Tecidos i.e., Companhia Tecidos and Companhia Tecidos go up and down completely randomly.

Pair Corralation between Companhia Tecidos and Companhia Tecidos

Assuming the 90 days trading horizon Companhia Tecidos Santanense is expected to generate 1.94 times more return on investment than Companhia Tecidos. However, Companhia Tecidos is 1.94 times more volatile than Companhia Tecidos Santanense. It trades about -0.15 of its potential returns per unit of risk. Companhia Tecidos Santanense is currently generating about -0.34 per unit of risk. If you would invest  104.00  in Companhia Tecidos Santanense on September 26, 2024 and sell it today you would lose (25.00) from holding Companhia Tecidos Santanense or give up 24.04% of portfolio value over 90 days.

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

Companhia Tecidos Santanense  vs.  Companhia Tecidos Santanense

Companhia Tecidos

Risk-Adjusted Performance

0 of 100

Very Weak

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

Companhia Tecidos

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Companhia Tecidos and Companhia Tecidos

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

The idea behind Companhia Tecidos Santanense and Companhia Tecidos Santanense 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.