Correlation Between Profarma Distribuidora and Bahema Educao

Can any of the company-specific risk be diversified away by investing in both Profarma Distribuidora and Bahema Educao 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 Profarma Distribuidora and Bahema Educao into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Profarma Distribuidora and Bahema Educao

-0.68

Correlation Coefficient

Profarma Distribuidora  Bahema Educao

Excellent diversification

The 3 months correlation between Profarma and Bahema is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Profarma Distribuidora de and Bahema Educao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bahema Educao SA and Profarma Distribuidora 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 Profarma Distribuidora de are associated (or correlated) with Bahema Educao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bahema Educao SA has no effect on the direction of Profarma Distribuidora i.e., Profarma Distribuidora and Bahema Educao go up and down completely randomly.

Pair Corralation between Profarma Distribuidora and Bahema Educao

Assuming the 90 days trading horizon Profarma Distribuidora de is expected to generate 0.55 times more return on investment than Bahema Educao. However, Profarma Distribuidora de is 1.82 times less risky than Bahema Educao. It trades about 0.11 of its potential returns per unit of risk. Bahema Educao SA is currently generating about -0.12 per unit of risk. If you would invest  594.00  in Profarma Distribuidora de on September 13, 2024 and sell it today you would earn a total of  100.00  from holding Profarma Distribuidora de or generate 16.84% return on investment over 90 days.

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

Profarma Distribuidora de  vs.  Bahema Educao SA

Profarma Distribuidora

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Profarma Distribuidora de are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Profarma Distribuidora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bahema Educao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bahema Educao 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 Profarma Distribuidora and Bahema Educao

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

The idea behind Profarma Distribuidora de and Bahema Educao 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.