Correlation Between HEDGE Brasil and Vibra Energia

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

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

Diversification Opportunities for HEDGE Brasil and Vibra Energia

0.77

Correlation Coefficient

HEDGE Brasil  Vibra Energia

Poor diversification

The 3 months correlation between HEDGE and Vibra is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding HEDGE Brasil Shopping and Vibra Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vibra Energia SA and HEDGE Brasil 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 HEDGE Brasil Shopping are associated (or correlated) with Vibra Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vibra Energia SA has no effect on the direction of HEDGE Brasil i.e., HEDGE Brasil and Vibra Energia go up and down completely randomly.

Pair Corralation between HEDGE Brasil and Vibra Energia

Assuming the 90 days trading horizon HEDGE Brasil Shopping is expected to generate 0.66 times more return on investment than Vibra Energia. However, HEDGE Brasil Shopping is 1.52 times less risky than Vibra Energia. It trades about -0.11 of its potential returns per unit of risk. Vibra Energia SA is currently generating about -0.18 per unit of risk. If you would invest  19,408  in HEDGE Brasil Shopping on October 24, 2024 and sell it today you would lose (1,585) from holding HEDGE Brasil Shopping or give up 8.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

HEDGE Brasil Shopping  vs.  Vibra Energia SA

HEDGE Brasil Shopping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEDGE Brasil Shopping has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vibra Energia SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vibra Energia 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HEDGE Brasil and Vibra Energia

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

The idea behind HEDGE Brasil Shopping and Vibra Energia 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.