Correlation Between CVC Brasil and Magazine Luiza

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

By analyzing existing cross correlation between CVC Brasil Operadora and Magazine Luiza SA, you can compare the effects of market volatilities on CVC Brasil and Magazine Luiza 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 CVC Brasil with a short position of Magazine Luiza. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVC Brasil and Magazine Luiza.

Diversification Opportunities for CVC Brasil and Magazine Luiza

-0.22

Correlation Coefficient

CVC Brasil  Magazine Luiza

Very good diversification

The 3 months correlation between CVC and Magazine is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding CVC Brasil Operadora and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza SA and CVC Brasil 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 CVC Brasil Operadora are associated (or correlated) with Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of CVC Brasil i.e., CVC Brasil and Magazine Luiza go up and down completely randomly.

Pair Corralation between CVC Brasil and Magazine Luiza

Assuming the 90 days trading horizon CVC Brasil Operadora is expected to under-perform the Magazine Luiza. But the stock apears to be less risky and, when comparing its historical volatility, CVC Brasil Operadora is 8.92 times less risky than Magazine Luiza. The stock trades about -0.01 of its potential returns per unit of risk. The Magazine Luiza SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,820  in Magazine Luiza SA on September 10, 2024 and sell it today you would lose (1,966) from holding Magazine Luiza SA or give up 69.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

CVC Brasil Operadora  vs.  Magazine Luiza SA

CVC Brasil Operadora

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVC Brasil Operadora are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CVC Brasil unveiled solid returns over the last few months and may actually be approaching a breakup point.

Magazine Luiza SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magazine Luiza SA 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CVC Brasil and Magazine Luiza

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

The idea behind CVC Brasil Operadora and Magazine Luiza 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.