Correlation Between PDG Realty and Gafisa SA

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

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

Diversification Opportunities for PDG Realty and Gafisa SA

0.88

Correlation Coefficient

PDG Realty  Gafisa SA

Very poor diversification

The 3 months correlation between PDG and Gafisa is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding PDG Realty SA and Gafisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gafisa SA and PDG Realty 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 PDG Realty SA are associated (or correlated) with Gafisa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gafisa SA has no effect on the direction of PDG Realty i.e., PDG Realty and Gafisa SA go up and down completely randomly.

Pair Corralation between PDG Realty and Gafisa SA

Assuming the 90 days trading horizon PDG Realty SA is expected to under-perform the Gafisa SA. In addition to that, PDG Realty is 6.48 times more volatile than Gafisa SA. It trades about -0.14 of its total potential returns per unit of risk. Gafisa SA is currently generating about -0.2 per unit of volatility. If you would invest  260.00  in Gafisa SA on September 2, 2024 and sell it today you would lose (112.00) from holding Gafisa SA or give up 43.08% of portfolio value over 90 days.

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

PDG Realty SA  vs.  Gafisa SA

PDG Realty SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PDG Realty 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.

Gafisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gafisa 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 PDG Realty and Gafisa SA

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

The idea behind PDG Realty SA and Gafisa 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.