Correlation Between Ouro Fino and Bombril SA

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

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

Diversification Opportunities for Ouro Fino and Bombril SA

0.41

Correlation Coefficient

Ouro Fino  Bombril SA

Very weak diversification

The 3 months correlation between Ouro and Bombril is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ouro Fino Sade and Bombril SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombril SA and Ouro Fino 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 Ouro Fino Sade are associated (or correlated) with Bombril SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombril SA has no effect on the direction of Ouro Fino i.e., Ouro Fino and Bombril SA go up and down completely randomly.

Pair Corralation between Ouro Fino and Bombril SA

Assuming the 90 days trading horizon Ouro Fino Sade is expected to generate 0.63 times more return on investment than Bombril SA. However, Ouro Fino Sade is 1.59 times less risky than Bombril SA. It trades about -0.04 of its potential returns per unit of risk. Bombril SA is currently generating about -0.06 per unit of risk. If you would invest  2,180  in Ouro Fino Sade on September 14, 2024 and sell it today you would lose (107.00) from holding Ouro Fino Sade or give up 4.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Ouro Fino Sade  vs.  Bombril SA

Ouro Fino Sade

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bombril SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bombril SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ouro Fino and Bombril SA

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

The idea behind Ouro Fino Sade and Bombril 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.