Correlation Between Paranapanema and Recrusul

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

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

Diversification Opportunities for Paranapanema and Recrusul

-0.89

Correlation Coefficient

Paranapanema  Recrusul

Pay attention - limited upside

The 3 months correlation between Paranapanema and Recrusul is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Paranapanema SA and Recrusul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recrusul SA and Paranapanema 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 Paranapanema SA are associated (or correlated) with Recrusul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recrusul SA has no effect on the direction of Paranapanema i.e., Paranapanema and Recrusul go up and down completely randomly.

Pair Corralation between Paranapanema and Recrusul

Assuming the 90 days trading horizon Paranapanema SA is expected to generate 0.35 times more return on investment than Recrusul. However, Paranapanema SA is 2.85 times less risky than Recrusul. It trades about -0.08 of its potential returns per unit of risk. Recrusul SA is currently generating about -0.13 per unit of risk. If you would invest  106.00  in Paranapanema SA on September 4, 2024 and sell it today you would lose (6.00) from holding Paranapanema SA or give up 5.66% of portfolio value over 90 days.

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

Paranapanema SA  vs.  Recrusul SA

Paranapanema SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paranapanema 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.

Recrusul SA

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Paranapanema and Recrusul

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

The idea behind Paranapanema SA and Recrusul 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.