Correlation Between Public Storage and Santos Brasil

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

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

Diversification Opportunities for Public Storage and Santos Brasil

-0.3

Correlation Coefficient

Public Storage  Santos Brasil

Very good diversification

The 3 months correlation between Public and Santos is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Public Storage and Santos Brasil Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos Brasil Participaes and Public Storage 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 Public Storage are associated (or correlated) with Santos Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos Brasil Participaes has no effect on the direction of Public Storage i.e., Public Storage and Santos Brasil go up and down completely randomly.

Pair Corralation between Public Storage and Santos Brasil

Assuming the 90 days trading horizon Public Storage is expected to generate 4.6 times less return on investment than Santos Brasil. But when comparing it to its historical volatility, Public Storage is 2.4 times less risky than Santos Brasil. It trades about 0.03 of its potential returns per unit of risk. Santos Brasil Participaes is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  673.00  in Santos Brasil Participaes on October 25, 2024 and sell it today you would earn a total of  642.00  from holding Santos Brasil Participaes or generate 95.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

Public Storage  vs.  Santos Brasil Participaes

Public Storage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Santos Brasil Participaes

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Santos Brasil Participaes are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Santos Brasil 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 Public Storage and Santos Brasil

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

The idea behind Public Storage and Santos Brasil Participaes 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.