Correlation Between Neogrid Participaes and Ambipar Participaes

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

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

Diversification Opportunities for Neogrid Participaes and Ambipar Participaes

0.15

Correlation Coefficient

Neogrid Participaes  Ambipar Participaes

Average diversification

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

Pair Corralation between Neogrid Participaes and Ambipar Participaes

Assuming the 90 days trading horizon Neogrid Participaes SA is expected to generate 19.58 times more return on investment than Ambipar Participaes. However, Neogrid Participaes is 19.58 times more volatile than Ambipar Participaes e. It trades about 0.1 of its potential returns per unit of risk. Ambipar Participaes e is currently generating about 0.08 per unit of risk. If you would invest  3,609  in Neogrid Participaes SA on October 11, 2024 and sell it today you would lose (1,658) from holding Neogrid Participaes SA or give up 45.94% of portfolio value over 90 days.

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

Neogrid Participaes SA  vs.  Ambipar Participaes e

Neogrid Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neogrid Participaes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ambipar Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Neogrid Participaes and Ambipar Participaes

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

The idea behind Neogrid Participaes SA and Ambipar Participaes e 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.