Correlation Between Grendene and EZTEC Empreendimentos

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

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

Diversification Opportunities for Grendene and EZTEC Empreendimentos

0.64

Correlation Coefficient

Grendene  EZTEC Empreendimentos

Poor diversification

The 3 months correlation between Grendene and EZTEC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Grendene SA and EZTEC Empreendimentos e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EZTEC Empreendimentos and Grendene 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 Grendene SA are associated (or correlated) with EZTEC Empreendimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EZTEC Empreendimentos has no effect on the direction of Grendene i.e., Grendene and EZTEC Empreendimentos go up and down completely randomly.

Pair Corralation between Grendene and EZTEC Empreendimentos

Assuming the 90 days trading horizon Grendene SA is expected to generate 0.88 times more return on investment than EZTEC Empreendimentos. However, Grendene SA is 1.14 times less risky than EZTEC Empreendimentos. It trades about 0.12 of its potential returns per unit of risk. EZTEC Empreendimentos e is currently generating about 0.05 per unit of risk. If you would invest  519.00  in Grendene SA on December 7, 2024 and sell it today you would earn a total of  75.00  from holding Grendene SA or generate 14.45% return on investment over 90 days.

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

Grendene SA  vs.  EZTEC Empreendimentos e

Grendene SA

Risk-Adjusted Performance

OK

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

EZTEC Empreendimentos

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Grendene and EZTEC Empreendimentos

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

The idea behind Grendene SA and EZTEC Empreendimentos e 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.