Correlation Between Porto Seguro and Itasa Investimentos

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

Diversification Opportunities for Porto Seguro and Itasa Investimentos

0.67

Correlation Coefficient

Porto Seguro  Itasa Investimentos

Poor diversification

The 3 months correlation between Porto and Itasa is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Porto Seguro SA and Itasa Investimentos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itasa Investimentos 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 Itasa Investimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itasa Investimentos has no effect on the direction of Porto Seguro i.e., Porto Seguro and Itasa Investimentos go up and down completely randomly.

Pair Corralation between Porto Seguro and Itasa Investimentos

Assuming the 90 days trading horizon Porto Seguro SA is expected to under-perform the Itasa Investimentos. But the stock apears to be less risky and, when comparing its historical volatility, Porto Seguro SA is 1.3 times less risky than Itasa Investimentos. The stock trades about -0.03 of its potential returns per unit of risk. The Itasa Investimentos is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  870.00  in Itasa Investimentos on December 4, 2024 and sell it today you would earn a total of  44.00  from holding Itasa Investimentos or generate 5.06% return on investment over 90 days.

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

Porto Seguro SA  vs.  Itasa Investimentos

Porto Seguro SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Porto Seguro SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Itasa Investimentos

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Itasa Investimentos are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Itasa Investimentos may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Porto Seguro and Itasa Investimentos

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

The idea behind Porto Seguro SA and Itasa Investimentos 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.