Correlation Between Nine Dragons and Klabin Sa

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

By analyzing existing cross correlation between Nine Dragons Paper and Klabin Sa A, you can compare the effects of market volatilities on Nine Dragons and Klabin 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 Nine Dragons with a short position of Klabin Sa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nine Dragons and Klabin Sa.

Diversification Opportunities for Nine Dragons and Klabin Sa

0.15

Correlation Coefficient

Nine Dragons  Klabin Sa

Average diversification

The 3 months correlation between Nine and Klabin is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nine Dragons Paper and Klabin Sa A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klabin Sa A and Nine Dragons 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 Nine Dragons Paper are associated (or correlated) with Klabin Sa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klabin Sa A has no effect on the direction of Nine Dragons i.e., Nine Dragons and Klabin Sa go up and down completely randomly.

Pair Corralation between Nine Dragons and Klabin Sa

Assuming the 90 days horizon Nine Dragons Paper is expected to under-perform the Klabin Sa. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nine Dragons Paper is 1.68 times less risky than Klabin Sa. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Klabin Sa A is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  707.00  in Klabin Sa A on October 26, 2024 and sell it today you would lose (13.00) from holding Klabin Sa A or give up 1.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Nine Dragons Paper  vs.  Klabin Sa A

Nine Dragons Paper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nine Dragons Paper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Klabin Sa A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Klabin Sa A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Klabin Sa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nine Dragons and Klabin Sa

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

The idea behind Nine Dragons Paper and Klabin Sa A 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.