Correlation Between Movida Participaes and PBG SA

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

Diversification Opportunities for Movida Participaes and PBG SA

0.23

Correlation Coefficient

Movida Participaes  PBG SA

Modest diversification

The 3 months correlation between Movida and PBG is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Movida Participaes SA and PBG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBG 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 PBG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBG SA has no effect on the direction of Movida Participaes i.e., Movida Participaes and PBG SA go up and down completely randomly.

Pair Corralation between Movida Participaes and PBG SA

Assuming the 90 days trading horizon Movida Participaes SA is expected to generate 1.44 times more return on investment than PBG SA. However, Movida Participaes is 1.44 times more volatile than PBG SA. It trades about 0.15 of its potential returns per unit of risk. PBG SA is currently generating about 0.01 per unit of risk. If you would invest  354.00  in Movida Participaes SA on December 30, 2024 and sell it today you would earn a total of  156.00  from holding Movida Participaes SA or generate 44.07% return on investment over 90 days.

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

Movida Participaes SA  vs.  PBG SA

Movida Participaes

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Movida Participaes SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Movida Participaes unveiled solid returns over the last few months and may actually be approaching a breakup point.

PBG SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Movida Participaes and PBG SA

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

The idea behind Movida Participaes SA and PBG 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.