Correlation Between HALI34 and Movida Participaes

Can any of the company-specific risk be diversified away by investing in both HALI34 and Movida Participaes 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 HALI34 and Movida Participaes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HALI34 and Movida Participaes SA, you can compare the effects of market volatilities on HALI34 and Movida Participaes 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 HALI34 with a short position of Movida Participaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of HALI34 and Movida Participaes.

Diversification Opportunities for HALI34 and Movida Participaes

-0.37

Correlation Coefficient

HALI34  Movida Participaes

Very good diversification

The 3 months correlation between HALI34 and Movida is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding HALI34 and Movida Participaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Movida Participaes and HALI34 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 HALI34 are associated (or correlated) with Movida Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Movida Participaes has no effect on the direction of HALI34 i.e., HALI34 and Movida Participaes go up and down completely randomly.

Pair Corralation between HALI34 and Movida Participaes

Assuming the 90 days trading horizon HALI34 is expected to generate 0.62 times more return on investment than Movida Participaes. However, HALI34 is 1.6 times less risky than Movida Participaes. It trades about -0.04 of its potential returns per unit of risk. Movida Participaes SA is currently generating about -0.06 per unit of risk. If you would invest  18,624  in HALI34 on September 30, 2024 and sell it today you would lose (2,848) from holding HALI34 or give up 15.29% of portfolio value over 90 days.

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

HALI34  vs.  Movida Participaes SA

HALI34

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HALI34 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, HALI34 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Movida Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Movida Participaes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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 HALI34 and Movida Participaes

The main advantage of trading using opposite HALI34 and Movida Participaes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HALI34 position performs unexpectedly, Movida Participaes 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 Movida Participaes will offset losses from the drop in Movida Participaes' long position.

The idea behind HALI34 and Movida Participaes 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.