Correlation Between GP Investments and Patria Investments

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

By analyzing existing cross correlation between GP Investments and Patria Investments Limited, you can compare the effects of market volatilities on GP Investments and Patria Investments 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 GP Investments with a short position of Patria Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of GP Investments and Patria Investments.

Diversification Opportunities for GP Investments and Patria Investments

-0.18

Correlation Coefficient

GP Investments  Patria Investments

Good diversification

The 3 months correlation between GPIV33 and Patria is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding GP Investments and Patria Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments and GP Investments 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 GP Investments are associated (or correlated) with Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of GP Investments i.e., GP Investments and Patria Investments go up and down completely randomly.

Pair Corralation between GP Investments and Patria Investments

Assuming the 90 days trading horizon GP Investments is expected to generate 1.77 times more return on investment than Patria Investments. However, GP Investments is 1.77 times more volatile than Patria Investments Limited. It trades about 0.04 of its potential returns per unit of risk. Patria Investments Limited is currently generating about -0.05 per unit of risk. If you would invest  375.00  in GP Investments on December 25, 2024 and sell it today you would earn a total of  19.00  from holding GP Investments or generate 5.07% return on investment over 90 days.

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

GP Investments  vs.  Patria Investments Limited

GP Investments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GP Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, GP Investments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Patria Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Patria Investments Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Patria Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GP Investments and Patria Investments

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

The idea behind GP Investments and Patria Investments Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.