Correlation Between Patria Investments and Companhia Siderrgica

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

By analyzing existing cross correlation between Patria Investments Limited and Companhia Siderrgica Nacional, you can compare the effects of market volatilities on Patria Investments and Companhia Siderrgica 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 Patria Investments with a short position of Companhia Siderrgica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Patria Investments and Companhia Siderrgica.

Diversification Opportunities for Patria Investments and Companhia Siderrgica

-0.03

Correlation Coefficient

Patria Investments  Companhia Siderrgica

Good diversification

The 3 months correlation between Patria and Companhia is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Patria Investments Limited and Companhia Siderrgica Nacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Siderrgica and Patria Investments 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 Patria Investments Limited are associated (or correlated) with Companhia Siderrgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Siderrgica has no effect on the direction of Patria Investments i.e., Patria Investments and Companhia Siderrgica go up and down completely randomly.

Pair Corralation between Patria Investments and Companhia Siderrgica

Assuming the 90 days trading horizon Patria Investments Limited is expected to under-perform the Companhia Siderrgica. But the stock apears to be less risky and, when comparing its historical volatility, Patria Investments Limited is 1.91 times less risky than Companhia Siderrgica. The stock trades about -0.05 of its potential returns per unit of risk. The Companhia Siderrgica Nacional is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  890.00  in Companhia Siderrgica Nacional on December 26, 2024 and sell it today you would earn a total of  105.00  from holding Companhia Siderrgica Nacional or generate 11.8% return on investment over 90 days.

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

Patria Investments Limited  vs.  Companhia Siderrgica Nacional

Patria Investments

Risk-Adjusted Performance

Very Weak

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

Companhia Siderrgica

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Siderrgica Nacional are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia Siderrgica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Patria Investments and Companhia Siderrgica

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

The idea behind Patria Investments Limited and Companhia Siderrgica Nacional 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.