Correlation Between Gafisa SA and PDG Realty

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

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

Diversification Opportunities for Gafisa SA and PDG Realty

-0.12

Correlation Coefficient

Gafisa SA  PDG Realty

Good diversification

The 3 months correlation between Gafisa and PDG is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Gafisa SA and PDG Realty SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDG Realty SA 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 PDG Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDG Realty SA has no effect on the direction of Gafisa SA i.e., Gafisa SA and PDG Realty go up and down completely randomly.

Pair Corralation between Gafisa SA and PDG Realty

Assuming the 90 days trading horizon Gafisa SA is expected to generate 13.21 times less return on investment than PDG Realty. But when comparing it to its historical volatility, Gafisa SA is 16.06 times less risky than PDG Realty. It trades about 0.15 of its potential returns per unit of risk. PDG Realty SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  125.00  in PDG Realty SA on December 30, 2024 and sell it today you would lose (50.00) from holding PDG Realty SA or give up 40.0% of portfolio value over 90 days.

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

Gafisa SA  vs.  PDG Realty SA

Gafisa SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gafisa SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gafisa SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

PDG Realty SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PDG Realty SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PDG Realty unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gafisa SA and PDG Realty

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

The idea behind Gafisa SA and PDG Realty 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.