Correlation Between Magazine Luiza and Gol Linhas
Can any of the company-specific risk be diversified away by investing in both Magazine Luiza 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 Magazine Luiza and Gol Linhas 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 Gol Linhas Areas, you can compare the effects of market volatilities on Magazine Luiza 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 Magazine Luiza with a short position of Gol Linhas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magazine Luiza and Gol Linhas.
Diversification Opportunities for Magazine Luiza and Gol Linhas
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Magazine and Gol is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza 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 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 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 Magazine Luiza i.e., Magazine Luiza and Gol Linhas go up and down completely randomly.
Pair Corralation between Magazine Luiza and Gol Linhas
Assuming the 90 days trading horizon Magazine Luiza SA is expected to under-perform the Gol Linhas. In addition to that, Magazine Luiza is 1.11 times more volatile than Gol Linhas Areas. It trades about -0.03 of its total potential returns per unit of risk. Gol Linhas Areas is currently generating about 0.07 per unit of volatility. If you would invest 108.00 in Gol Linhas Areas on September 6, 2024 and sell it today you would earn a total of 30.00 from holding Gol Linhas Areas or generate 27.78% 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. Gol Linhas Areas
Performance |
Timeline |
Magazine Luiza SA |
Gol Linhas Areas |
Magazine Luiza and Gol Linhas Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Magazine Luiza and Gol Linhas
The main advantage of trading using opposite Magazine Luiza and Gol Linhas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magazine Luiza 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.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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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