Correlation Between Movida Participaes and Grendene

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

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

Diversification Opportunities for Movida Participaes and Grendene

0.73

Correlation Coefficient

Movida Participaes  Grendene

Poor diversification

The 3 months correlation between Movida and Grendene is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Movida Participaes SA and Grendene SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grendene SA and Movida Participaes 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 Movida Participaes SA are associated (or correlated) with Grendene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grendene SA has no effect on the direction of Movida Participaes i.e., Movida Participaes and Grendene go up and down completely randomly.

Pair Corralation between Movida Participaes and Grendene

Assuming the 90 days trading horizon Movida Participaes SA is expected to under-perform the Grendene. In addition to that, Movida Participaes is 2.53 times more volatile than Grendene SA. It trades about -0.25 of its total potential returns per unit of risk. Grendene SA is currently generating about 0.01 per unit of volatility. If you would invest  514.00  in Grendene SA on September 4, 2024 and sell it today you would earn a total of  1.00  from holding Grendene SA or generate 0.19% return on investment over 90 days.

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

Movida Participaes SA  vs.  Grendene SA

Movida Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Movida Participaes 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.

Grendene SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grendene SA 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.

Pair Trading with Movida Participaes and Grendene

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

The idea behind Movida Participaes SA and Grendene 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.