Correlation Between Porto Seguro and H1II34

Can any of the company-specific risk be diversified away by investing in both Porto Seguro and H1II34 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 H1II34 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 H1II34, you can compare the effects of market volatilities on Porto Seguro and H1II34 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 H1II34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Porto Seguro and H1II34.

Diversification Opportunities for Porto Seguro and H1II34

-0.66

Correlation Coefficient

Porto Seguro  H1II34

Excellent diversification

The 3 months correlation between Porto and H1II34 is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Porto Seguro SA and H1II34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H1II34 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 H1II34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H1II34 has no effect on the direction of Porto Seguro i.e., Porto Seguro and H1II34 go up and down completely randomly.

Pair Corralation between Porto Seguro and H1II34

Assuming the 90 days trading horizon Porto Seguro SA is expected to under-perform the H1II34. But the stock apears to be less risky and, when comparing its historical volatility, Porto Seguro SA is 1.93 times less risky than H1II34. The stock trades about -0.14 of its potential returns per unit of risk. The H1II34 is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,593  in H1II34 on September 27, 2024 and sell it today you would lose (43.00) from holding H1II34 or give up 2.7% of portfolio value over 90 days.

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

Porto Seguro SA  vs.  H1II34

Porto Seguro SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Porto Seguro SA are ranked lower than 2 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

H1II34

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H1II34 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Porto Seguro and H1II34

The main advantage of trading using opposite Porto Seguro and H1II34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porto Seguro position performs unexpectedly, H1II34 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 H1II34 will offset losses from the drop in H1II34's long position.

The idea behind Porto Seguro SA and H1II34 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.