Correlation Between Gafisa SA and Rossi Residencial

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

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

Diversification Opportunities for Gafisa SA and Rossi Residencial

0.33

Correlation Coefficient

Gafisa SA  Rossi Residencial

Weak diversification

The 3 months correlation between Gafisa and Rossi is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Gafisa SA and Rossi Residencial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rossi Residencial 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 Rossi Residencial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rossi Residencial has no effect on the direction of Gafisa SA i.e., Gafisa SA and Rossi Residencial go up and down completely randomly.

Pair Corralation between Gafisa SA and Rossi Residencial

Assuming the 90 days trading horizon Gafisa SA is expected to under-perform the Rossi Residencial. In addition to that, Gafisa SA is 1.48 times more volatile than Rossi Residencial SA. It trades about -0.26 of its total potential returns per unit of risk. Rossi Residencial SA is currently generating about 0.15 per unit of volatility. If you would invest  289.00  in Rossi Residencial SA on November 29, 2024 and sell it today you would earn a total of  21.00  from holding Rossi Residencial SA or generate 7.27% return on investment over 90 days.

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

Gafisa SA  vs.  Rossi Residencial SA

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Rossi Residencial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rossi Residencial SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Rossi Residencial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gafisa SA and Rossi Residencial

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

The idea behind Gafisa SA and Rossi Residencial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.