Correlation Between Fras Le and Gafisa SA

Can any of the company-specific risk be diversified away by investing in both Fras Le and Gafisa 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 Fras Le and Gafisa SA 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 Gafisa SA, you can compare the effects of market volatilities on Fras Le and Gafisa 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 Fras Le with a short position of Gafisa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Gafisa SA.

Diversification Opportunities for Fras Le and Gafisa SA

-0.51

Correlation Coefficient

Fras Le  Gafisa SA

Excellent diversification

The 3 months correlation between Fras and Gafisa is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Gafisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gafisa SA 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 Gafisa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gafisa SA has no effect on the direction of Fras Le i.e., Fras Le and Gafisa SA go up and down completely randomly.

Pair Corralation between Fras Le and Gafisa SA

Assuming the 90 days trading horizon Fras le SA is expected to generate 0.35 times more return on investment than Gafisa SA. However, Fras le SA is 2.82 times less risky than Gafisa SA. It trades about 0.05 of its potential returns per unit of risk. Gafisa SA is currently generating about -0.2 per unit of risk. If you would invest  1,965  in Fras le SA on September 3, 2024 and sell it today you would earn a total of  71.00  from holding Fras le SA or generate 3.61% return on investment over 90 days.

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

Fras le SA  vs.  Gafisa SA

Fras le SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fras le SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fras Le is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Gafisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gafisa SA 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 Fras Le and Gafisa SA

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

The idea behind Fras le SA and Gafisa 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.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.