Correlation Between IRB Brasil and Gol Linhas
Can any of the company-specific risk be diversified away by investing in both IRB Brasil and Gol Linhas 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 IRB Brasil and Gol Linhas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IRB Brasil Resseguros SA and Gol Linhas Areas, you can compare the effects of market volatilities on IRB Brasil and Gol Linhas 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 IRB Brasil with a short position of Gol Linhas. Check out your portfolio center. Please also check ongoing floating volatility patterns of IRB Brasil and Gol Linhas.
Diversification Opportunities for IRB Brasil and Gol Linhas
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IRB and Gol is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding IRB Brasil Resseguros SA and Gol Linhas Areas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gol Linhas Areas and IRB 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 IRB Brasil Resseguros SA are associated (or correlated) with Gol Linhas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gol Linhas Areas has no effect on the direction of IRB Brasil i.e., IRB Brasil and Gol Linhas go up and down completely randomly.
Pair Corralation between IRB Brasil and Gol Linhas
Assuming the 90 days trading horizon IRB Brasil Resseguros SA is expected to generate 0.73 times more return on investment than Gol Linhas. However, IRB Brasil Resseguros SA is 1.37 times less risky than Gol Linhas. It trades about -0.01 of its potential returns per unit of risk. Gol Linhas Areas is currently generating about -0.13 per unit of risk. If you would invest 5,102 in IRB Brasil Resseguros SA on September 5, 2024 and sell it today you would lose (1,115) from holding IRB Brasil Resseguros SA or give up 21.85% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 99.6% |
Values | Daily Returns |
IRB Brasil Resseguros SA vs. Gol Linhas Areas
Performance |
Timeline |
IRB Brasil Resseguros |
Gol Linhas Areas |
IRB Brasil and Gol Linhas Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IRB Brasil and Gol Linhas
The main advantage of trading using opposite IRB Brasil and Gol Linhas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IRB Brasil position performs unexpectedly, Gol Linhas 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 Gol Linhas will offset losses from the drop in Gol Linhas' long position.IRB Brasil vs. Cogna Educao SA | IRB Brasil vs. CVC Brasil Operadora | IRB Brasil vs. Oi SA | IRB Brasil vs. Azul SA |
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Check out your portfolio center.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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