Correlation Between Movida Participaes and SIMPAR SA

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

Diversification Opportunities for Movida Participaes and SIMPAR SA

0.85

Correlation Coefficient

Movida Participaes  SIMPAR SA

Very poor diversification

The 3 months correlation between Movida and SIMPAR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Movida Participaes SA and SIMPAR SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMPAR 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 SIMPAR SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMPAR SA has no effect on the direction of Movida Participaes i.e., Movida Participaes and SIMPAR SA go up and down completely randomly.

Pair Corralation between Movida Participaes and SIMPAR SA

Assuming the 90 days trading horizon Movida Participaes SA is expected to under-perform the SIMPAR SA. In addition to that, Movida Participaes is 1.28 times more volatile than SIMPAR SA. It trades about -0.19 of its total potential returns per unit of risk. SIMPAR SA is currently generating about -0.21 per unit of volatility. If you would invest  544.00  in SIMPAR SA on September 3, 2024 and sell it today you would lose (82.00) from holding SIMPAR SA or give up 15.07% of portfolio value over 90 days.

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

Movida Participaes SA  vs.  SIMPAR 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.

SIMPAR SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIMPAR 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.

Pair Trading with Movida Participaes and SIMPAR SA

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

The idea behind Movida Participaes SA and SIMPAR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .