Correlation Between Itasa Investimentos and WEG SA

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

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

Diversification Opportunities for Itasa Investimentos and WEG SA

-0.1

Correlation Coefficient

Itasa Investimentos  WEG SA

Good diversification

The 3 months correlation between Itasa and WEG is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos and WEG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEG SA and Itasa Investimentos 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 Itasa Investimentos are associated (or correlated) with WEG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEG SA has no effect on the direction of Itasa Investimentos i.e., Itasa Investimentos and WEG SA go up and down completely randomly.

Pair Corralation between Itasa Investimentos and WEG SA

Assuming the 90 days trading horizon Itasa Investimentos is expected to under-perform the WEG SA. But the stock apears to be less risky and, when comparing its historical volatility, Itasa Investimentos is 1.17 times less risky than WEG SA. The stock trades about -0.14 of its potential returns per unit of risk. The WEG SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,293  in WEG SA on September 14, 2024 and sell it today you would earn a total of  487.00  from holding WEG SA or generate 9.2% return on investment over 90 days.

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

Itasa Investimentos  vs.  WEG SA

Itasa Investimentos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itasa Investimentos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

WEG SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WEG SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WEG SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Itasa Investimentos and WEG SA

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

The idea behind Itasa Investimentos and WEG 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.