Correlation Between Oi SA and Cogna Educao

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

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

Diversification Opportunities for Oi SA and Cogna Educao

0.01

Correlation Coefficient

Oi SA  Cogna Educao

Significant diversification

The 3 months correlation between OIBR4 and Cogna is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Oi SA and Cogna Educao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogna Educao SA and Oi SA 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 Oi SA are associated (or correlated) with Cogna Educao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogna Educao SA has no effect on the direction of Oi SA i.e., Oi SA and Cogna Educao go up and down completely randomly.

Pair Corralation between Oi SA and Cogna Educao

Assuming the 90 days trading horizon Oi SA is expected to generate 24.73 times more return on investment than Cogna Educao. However, Oi SA is 24.73 times more volatile than Cogna Educao SA. It trades about 0.08 of its potential returns per unit of risk. Cogna Educao SA is currently generating about -0.09 per unit of risk. If you would invest  1,680  in Oi SA on September 4, 2024 and sell it today you would lose (630.00) from holding Oi SA or give up 37.5% of portfolio value over 90 days.

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

Oi SA  vs.  Cogna Educao SA

Oi SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cogna Educao SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Oi SA and Cogna Educao

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

The idea behind Oi SA and Cogna Educao 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.