Correlation Between Fras Le and Cyrela Brazil

Can any of the company-specific risk be diversified away by investing in both Fras Le and Cyrela Brazil 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 Fras Le and Cyrela Brazil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fras le SA and Cyrela Brazil Realty, you can compare the effects of market volatilities on Fras Le and Cyrela Brazil 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 Fras Le with a short position of Cyrela Brazil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Cyrela Brazil.

Diversification Opportunities for Fras Le and Cyrela Brazil

0.9

Correlation Coefficient

Fras Le  Cyrela Brazil

Almost no diversification

The 3 months correlation between Fras and Cyrela is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Cyrela Brazil Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyrela Brazil Realty and Fras Le 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 Fras le SA are associated (or correlated) with Cyrela Brazil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyrela Brazil Realty has no effect on the direction of Fras Le i.e., Fras Le and Cyrela Brazil go up and down completely randomly.

Pair Corralation between Fras Le and Cyrela Brazil

Assuming the 90 days trading horizon Fras Le is expected to generate 1.32 times less return on investment than Cyrela Brazil. But when comparing it to its historical volatility, Fras le SA is 1.6 times less risky than Cyrela Brazil. It trades about 0.42 of its potential returns per unit of risk. Cyrela Brazil Realty is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,657  in Cyrela Brazil Realty on December 31, 2024 and sell it today you would earn a total of  773.00  from holding Cyrela Brazil Realty or generate 46.65% return on investment over 90 days.

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

Fras le SA  vs.  Cyrela Brazil Realty

Fras le SA

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fras le SA are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fras Le unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cyrela Brazil Realty

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cyrela Brazil Realty are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cyrela Brazil unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fras Le and Cyrela Brazil

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

The idea behind Fras le SA and Cyrela Brazil Realty 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.