Correlation Between Monteiro Aranha and EBay

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

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

Diversification Opportunities for Monteiro Aranha and EBay

0.53

Correlation Coefficient

Monteiro Aranha  EBay

Very weak diversification

The 3 months correlation between Monteiro and EBay is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Monteiro Aranha SA and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc and Monteiro Aranha 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 Monteiro Aranha SA are associated (or correlated) with EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Monteiro Aranha i.e., Monteiro Aranha and EBay go up and down completely randomly.

Pair Corralation between Monteiro Aranha and EBay

Assuming the 90 days trading horizon Monteiro Aranha SA is expected to under-perform the EBay. But the stock apears to be less risky and, when comparing its historical volatility, Monteiro Aranha SA is 2.86 times less risky than EBay. The stock trades about -0.25 of its potential returns per unit of risk. The eBay Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  19,361  in eBay Inc on October 5, 2024 and sell it today you would lose (125.00) from holding eBay Inc or give up 0.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	84.21%
Values	Daily Returns

Monteiro Aranha SA  vs.  eBay Inc

Monteiro Aranha SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monteiro Aranha SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monteiro Aranha is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

eBay Inc

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Monteiro Aranha and EBay

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

The idea behind Monteiro Aranha SA and eBay Inc 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 Commodity Directory module to find actively traded commodities issued by global exchanges.