Correlation Between Padtec Holding and Neogrid Participaes

Can any of the company-specific risk be diversified away by investing in both Padtec Holding and Neogrid Participaes 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 Padtec Holding and Neogrid Participaes into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Padtec Holding and Neogrid Participaes

-0.19

Correlation Coefficient

Padtec Holding  Neogrid Participaes

Good diversification

The 3 months correlation between Padtec and Neogrid is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Padtec Holding SA and Neogrid Participaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neogrid Participaes and Padtec Holding 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 Padtec Holding SA are associated (or correlated) with Neogrid Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neogrid Participaes has no effect on the direction of Padtec Holding i.e., Padtec Holding and Neogrid Participaes go up and down completely randomly.

Pair Corralation between Padtec Holding and Neogrid Participaes

Assuming the 90 days trading horizon Padtec Holding SA is expected to generate 0.88 times more return on investment than Neogrid Participaes. However, Padtec Holding SA is 1.14 times less risky than Neogrid Participaes. It trades about 0.03 of its potential returns per unit of risk. Neogrid Participaes SA is currently generating about -0.02 per unit of risk. If you would invest  122.00  in Padtec Holding SA on December 23, 2024 and sell it today you would earn a total of  4.00  from holding Padtec Holding SA or generate 3.28% return on investment over 90 days.

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

Padtec Holding SA  vs.  Neogrid Participaes SA

Padtec Holding SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Padtec Holding SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Padtec Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Neogrid Participaes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neogrid Participaes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Neogrid Participaes 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 Padtec Holding and Neogrid Participaes

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

The idea behind Padtec Holding SA and Neogrid Participaes 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.