Correlation Between Electro Ao and Companhia Tecidos

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

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

Diversification Opportunities for Electro Ao and Companhia Tecidos

0.16

Correlation Coefficient

Electro Ao  Companhia Tecidos

Average diversification

The 3 months correlation between Electro and Companhia is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Electro Ao Altona and Companhia Tecidos Santanense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Tecidos and Electro Ao 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 Electro Ao Altona 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 Electro Ao i.e., Electro Ao and Companhia Tecidos go up and down completely randomly.

Pair Corralation between Electro Ao and Companhia Tecidos

Assuming the 90 days trading horizon Electro Ao Altona is expected to under-perform the Companhia Tecidos. But the preferred stock apears to be less risky and, when comparing its historical volatility, Electro Ao Altona is 91.81 times less risky than Companhia Tecidos. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Companhia Tecidos Santanense is currently generating about 0.31 of returns per unit of risk over similar time horizon. 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

Electro Ao Altona  vs.  Companhia Tecidos Santanense

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.

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 weak basic indicators, Companhia Tecidos unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electro Ao and Companhia Tecidos

The main advantage of trading using opposite Electro Ao and Companhia Tecidos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electro Ao 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 Electro Ao Altona 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.