Correlation Between Magazine Luiza and T1SC34

Can any of the company-specific risk be diversified away by investing in both Magazine Luiza and T1SC34 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 T1SC34 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 T1SC34, you can compare the effects of market volatilities on Magazine Luiza and T1SC34 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 T1SC34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magazine Luiza and T1SC34.

Diversification Opportunities for Magazine Luiza and T1SC34

-0.38

Correlation Coefficient

Magazine Luiza  T1SC34

Very good diversification

The 3 months correlation between Magazine and T1SC34 is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza SA and T1SC34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T1SC34 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 T1SC34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T1SC34 has no effect on the direction of Magazine Luiza i.e., Magazine Luiza and T1SC34 go up and down completely randomly.

Pair Corralation between Magazine Luiza and T1SC34

Assuming the 90 days trading horizon Magazine Luiza SA is expected to under-perform the T1SC34. In addition to that, Magazine Luiza is 2.3 times more volatile than T1SC34. It trades about -0.08 of its total potential returns per unit of risk. T1SC34 is currently generating about 0.13 per unit of volatility. If you would invest  1,044  in T1SC34 on September 27, 2024 and sell it today you would earn a total of  798.00  from holding T1SC34 or generate 76.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.26%
Values	Daily Returns

Magazine Luiza SA  vs.  T1SC34

Magazine Luiza SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magazine Luiza SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

T1SC34

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T1SC34 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, T1SC34 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Magazine Luiza and T1SC34

The main advantage of trading using opposite Magazine Luiza and T1SC34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magazine Luiza position performs unexpectedly, T1SC34 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 T1SC34 will offset losses from the drop in T1SC34's long position.

The idea behind Magazine Luiza SA and T1SC34 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.

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 CEOs Directory module to screen CEOs from public companies around the world.