Correlation Between Hidrovias and Santos Brasil

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

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

Diversification Opportunities for Hidrovias and Santos Brasil

0.38

Correlation Coefficient

Hidrovias  Santos Brasil

Weak diversification

The 3 months correlation between Hidrovias and Santos is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hidrovias do Brasil and Santos Brasil Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos Brasil Participaes and Hidrovias 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 Hidrovias do Brasil are associated (or correlated) with Santos Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos Brasil Participaes has no effect on the direction of Hidrovias i.e., Hidrovias and Santos Brasil go up and down completely randomly.

Pair Corralation between Hidrovias and Santos Brasil

Assuming the 90 days trading horizon Hidrovias do Brasil is expected to under-perform the Santos Brasil. But the stock apears to be less risky and, when comparing its historical volatility, Hidrovias do Brasil is 1.14 times less risky than Santos Brasil. The stock trades about -0.12 of its potential returns per unit of risk. The Santos Brasil Participaes is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,336  in Santos Brasil Participaes on September 17, 2024 and sell it today you would lose (36.00) from holding Santos Brasil Participaes or give up 2.69% of portfolio value over 90 days.

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

Hidrovias do Brasil  vs.  Santos Brasil Participaes

Hidrovias do Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hidrovias do Brasil 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.

Santos Brasil Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santos Brasil Participaes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Santos Brasil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hidrovias and Santos Brasil

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

The idea behind Hidrovias do Brasil and Santos Brasil Participaes 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.