Correlation Between Gafisa SA and Cyrela Brazil

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

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

Diversification Opportunities for Gafisa SA and Cyrela Brazil

-0.14

Correlation Coefficient

Gafisa SA  Cyrela Brazil

Good diversification

The 3 months correlation between Gafisa and Cyrela is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Gafisa 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 Gafisa SA 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 Gafisa 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 Gafisa SA i.e., Gafisa SA and Cyrela Brazil go up and down completely randomly.

Pair Corralation between Gafisa SA and Cyrela Brazil

Assuming the 90 days trading horizon Gafisa SA is expected to under-perform the Cyrela Brazil. In addition to that, Gafisa SA is 1.79 times more volatile than Cyrela Brazil Realty. It trades about -0.29 of its total potential returns per unit of risk. Cyrela Brazil Realty is currently generating about 0.22 per unit of volatility. If you would invest  1,954  in Cyrela Brazil Realty on November 28, 2024 and sell it today you would earn a total of  182.00  from holding Cyrela Brazil Realty or generate 9.31% return on investment over 90 days.

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

Gafisa SA  vs.  Cyrela Brazil Realty

Gafisa SA

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cyrela Brazil Realty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cyrela Brazil Realty are ranked lower than 10 (%) 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 Gafisa SA and Cyrela Brazil

The main advantage of trading using opposite Gafisa SA and Cyrela Brazil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gafisa SA 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 Gafisa 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.