Correlation Between Pet Center and PagSeguro Digital

Can any of the company-specific risk be diversified away by investing in both Pet Center and PagSeguro Digital 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 Pet Center and PagSeguro Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pet Center Comrcio and PagSeguro Digital, you can compare the effects of market volatilities on Pet Center and PagSeguro Digital 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 Pet Center with a short position of PagSeguro Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pet Center and PagSeguro Digital.

Diversification Opportunities for Pet Center and PagSeguro Digital

0.76

Correlation Coefficient

Pet Center  PagSeguro Digital

Poor diversification

The 3 months correlation between Pet and PagSeguro is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pet Center Comrcio and PagSeguro Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PagSeguro Digital and Pet Center 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 Pet Center Comrcio are associated (or correlated) with PagSeguro Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PagSeguro Digital has no effect on the direction of Pet Center i.e., Pet Center and PagSeguro Digital go up and down completely randomly.

Pair Corralation between Pet Center and PagSeguro Digital

Assuming the 90 days trading horizon Pet Center Comrcio is expected to generate 1.41 times more return on investment than PagSeguro Digital. However, Pet Center is 1.41 times more volatile than PagSeguro Digital. It trades about -0.11 of its potential returns per unit of risk. PagSeguro Digital is currently generating about -0.16 per unit of risk. If you would invest  511.00  in Pet Center Comrcio on October 6, 2024 and sell it today you would lose (109.00) from holding Pet Center Comrcio or give up 21.33% of portfolio value over 90 days.

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

Pet Center Comrcio  vs.  PagSeguro Digital

Pet Center Comrcio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pet Center Comrcio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

PagSeguro Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PagSeguro Digital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Pet Center and PagSeguro Digital

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

The idea behind Pet Center Comrcio and PagSeguro Digital 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.