Correlation Between Grendene and Gafisa SA

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

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

Diversification Opportunities for Grendene and Gafisa SA

0.92

Correlation Coefficient

Grendene  Gafisa SA

Almost no diversification

The 3 months correlation between Grendene and Gafisa is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Grendene SA and Gafisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gafisa SA 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 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 Grendene i.e., Grendene and Gafisa SA go up and down completely randomly.

Pair Corralation between Grendene and Gafisa SA

Assuming the 90 days trading horizon Grendene SA is expected to generate 0.38 times more return on investment than Gafisa SA. However, Grendene SA is 2.65 times less risky than Gafisa SA. It trades about -0.14 of its potential returns per unit of risk. Gafisa SA is currently generating about -0.23 per unit of risk. If you would invest  597.00  in Grendene SA on September 5, 2024 and sell it today you would lose (75.00) from holding Grendene SA or give up 12.56% of portfolio value over 90 days.

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

Grendene SA  vs.  Gafisa SA

Grendene SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grendene 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.

Gafisa SA

Risk-Adjusted Performance

0 of 100

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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Grendene and Gafisa SA

The main advantage of trading using opposite Grendene and Gafisa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grendene 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 Grendene SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.