Correlation Between Natura Co and Ser Educacional

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

By analyzing existing cross correlation between Natura Co Holding and Ser Educacional Sa, you can compare the effects of market volatilities on Natura Co and Ser Educacional 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 Natura Co with a short position of Ser Educacional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natura Co and Ser Educacional.

Diversification Opportunities for Natura Co and Ser Educacional

-0.12

Correlation Coefficient

Natura Co  Ser Educacional

Good diversification

The 3 months correlation between Natura and Ser is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Natura Co Holding and Ser Educacional Sa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ser Educacional Sa and Natura Co 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 Natura Co Holding are associated (or correlated) with Ser Educacional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ser Educacional Sa has no effect on the direction of Natura Co i.e., Natura Co and Ser Educacional go up and down completely randomly.

Pair Corralation between Natura Co and Ser Educacional

Assuming the 90 days trading horizon Natura Co Holding is expected to generate 0.62 times more return on investment than Ser Educacional. However, Natura Co Holding is 1.62 times less risky than Ser Educacional. It trades about 0.02 of its potential returns per unit of risk. Ser Educacional Sa is currently generating about -0.06 per unit of risk. If you would invest  1,425  in Natura Co Holding on September 13, 2024 and sell it today you would earn a total of  9.00  from holding Natura Co Holding or generate 0.63% return on investment over 90 days.

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

Natura Co Holding  vs.  Ser Educacional Sa

Natura Co Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Natura Co Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Natura Co is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ser Educacional Sa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ser Educacional 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 Natura Co and Ser Educacional

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

The idea behind Natura Co Holding and Ser Educacional 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 Global Correlations module to find global opportunities by holding instruments from different markets.