Correlation Between Gol Linhas and Gafisa SA

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

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

Diversification Opportunities for Gol Linhas and Gafisa SA

0.27

Correlation Coefficient

Gol Linhas  Gafisa SA

Modest diversification

The 3 months correlation between Gol and Gafisa is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Gol Linhas Areas and Gafisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gafisa SA and Gol Linhas 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 Gol Linhas Areas 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 Gol Linhas i.e., Gol Linhas and Gafisa SA go up and down completely randomly.

Pair Corralation between Gol Linhas and Gafisa SA

Assuming the 90 days trading horizon Gol Linhas is expected to generate 85.84 times less return on investment than Gafisa SA. But when comparing it to its historical volatility, Gol Linhas Areas is 8.02 times less risky than Gafisa SA. It trades about 0.03 of its potential returns per unit of risk. Gafisa SA is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  110.00  in Gafisa SA on December 30, 2024 and sell it today you would earn a total of  101.00  from holding Gafisa SA or generate 91.82% return on investment over 90 days.

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

Gol Linhas Areas  vs.  Gafisa SA

Gol Linhas Areas

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gol Linhas Areas are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gol Linhas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Gol Linhas and Gafisa SA

The main advantage of trading using opposite Gol Linhas and Gafisa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gol Linhas 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 Gol Linhas Areas 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.