Correlation Between Magazine Luiza and CVC Brasil
Can any of the company-specific risk be diversified away by investing in both Magazine Luiza and CVC 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 Magazine Luiza and CVC Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magazine Luiza SA and CVC Brasil Operadora, you can compare the effects of market volatilities on Magazine Luiza and CVC 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 Magazine Luiza with a short position of CVC Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magazine Luiza and CVC Brasil.
Diversification Opportunities for Magazine Luiza and CVC Brasil
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Magazine and CVC is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza SA and CVC Brasil Operadora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Brasil Operadora and Magazine Luiza 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 Magazine Luiza SA are associated (or correlated) with CVC Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Brasil Operadora has no effect on the direction of Magazine Luiza i.e., Magazine Luiza and CVC Brasil go up and down completely randomly.
Pair Corralation between Magazine Luiza and CVC Brasil
Assuming the 90 days trading horizon Magazine Luiza SA is expected to under-perform the CVC Brasil. But the stock apears to be less risky and, when comparing its historical volatility, Magazine Luiza SA is 1.28 times less risky than CVC Brasil. The stock trades about -0.12 of its potential returns per unit of risk. The CVC Brasil Operadora is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 187.00 in CVC Brasil Operadora on September 11, 2024 and sell it today you would earn a total of 21.00 from holding CVC Brasil Operadora or generate 11.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Magazine Luiza SA vs. CVC Brasil Operadora
Performance |
Timeline |
Magazine Luiza SA |
CVC Brasil Operadora |
Magazine Luiza and CVC Brasil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Magazine Luiza and CVC Brasil
The main advantage of trading using opposite Magazine Luiza and CVC Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magazine Luiza position performs unexpectedly, CVC 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 CVC Brasil will offset losses from the drop in CVC Brasil's long position.Magazine Luiza vs. WEG SA | Magazine Luiza vs. Vale SA | Magazine Luiza vs. Itasa Investimentos | Magazine Luiza vs. Ita Unibanco Holding |
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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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