Correlation Between Porto Seguro and Companhia Tecidos

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

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

Diversification Opportunities for Porto Seguro and Companhia Tecidos

-0.12

Correlation Coefficient

Porto Seguro  Companhia Tecidos

Good diversification

The 3 months correlation between Porto and Companhia is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Porto Seguro SA and Companhia Tecidos Santanense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Tecidos and Porto Seguro 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 Porto Seguro SA are associated (or correlated) with Companhia Tecidos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Tecidos has no effect on the direction of Porto Seguro i.e., Porto Seguro and Companhia Tecidos go up and down completely randomly.

Pair Corralation between Porto Seguro and Companhia Tecidos

Assuming the 90 days trading horizon Porto Seguro SA is expected to generate 0.54 times more return on investment than Companhia Tecidos. However, Porto Seguro SA is 1.86 times less risky than Companhia Tecidos. It trades about 0.01 of its potential returns per unit of risk. Companhia Tecidos Santanense is currently generating about -0.19 per unit of risk. If you would invest  3,619  in Porto Seguro SA on October 14, 2024 and sell it today you would earn a total of  23.00  from holding Porto Seguro SA or generate 0.64% return on investment over 90 days.

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

Porto Seguro SA  vs.  Companhia Tecidos Santanense

Porto Seguro SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Porto Seguro SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Porto Seguro is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Companhia Tecidos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Tecidos Santanense 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Porto Seguro and Companhia Tecidos

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

The idea behind Porto Seguro SA and Companhia Tecidos Santanense 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.