Correlation Between Gol Linhas and Magazine Luiza

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Can any of the company-specific risk be diversified away by investing in both Gol Linhas and Magazine Luiza 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 Magazine Luiza 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 Magazine Luiza SA, you can compare the effects of market volatilities on Gol Linhas and Magazine Luiza 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 Magazine Luiza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gol Linhas and Magazine Luiza.

Diversification Opportunities for Gol Linhas and Magazine Luiza

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between Gol and Magazine is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Gol Linhas Areas and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza 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 Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of Gol Linhas i.e., Gol Linhas and Magazine Luiza go up and down completely randomly.

Pair Corralation between Gol Linhas and Magazine Luiza

Assuming the 90 days trading horizon Gol Linhas Areas is expected to generate 1.13 times more return on investment than Magazine Luiza. However, Gol Linhas is 1.13 times more volatile than Magazine Luiza SA. It trades about 0.13 of its potential returns per unit of risk. Magazine Luiza SA is currently generating about -0.1 per unit of risk. If you would invest  105.00  in Gol Linhas Areas on September 6, 2024 and sell it today you would earn a total of  33.00  from holding Gol Linhas Areas or generate 31.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.41%
ValuesDaily Returns

Gol Linhas Areas  vs.  Magazine Luiza SA

 Performance 
       Timeline  
Gol Linhas Areas 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Gol Linhas Areas are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gol Linhas unveiled solid returns over the last few months and may actually be approaching a breakup point.
Magazine Luiza SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Magazine Luiza 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.

Gol Linhas and Magazine Luiza Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gol Linhas and Magazine Luiza

The main advantage of trading using opposite Gol Linhas and Magazine Luiza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gol Linhas position performs unexpectedly, Magazine Luiza 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 Magazine Luiza will offset losses from the drop in Magazine Luiza's long position.
The idea behind Gol Linhas Areas and Magazine Luiza 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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