Correlation Between Porto Seguro and Gen Digital

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

Diversification Opportunities for Porto Seguro and Gen Digital

0.57

Correlation Coefficient

Porto Seguro  Gen Digital

Very weak diversification

The 3 months correlation between Porto and Gen is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Porto Seguro SA and Gen Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gen Digital 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 Gen Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gen Digital has no effect on the direction of Porto Seguro i.e., Porto Seguro and Gen Digital go up and down completely randomly.

Pair Corralation between Porto Seguro and Gen Digital

Assuming the 90 days trading horizon Porto Seguro SA is expected to generate 0.73 times more return on investment than Gen Digital. However, Porto Seguro SA is 1.37 times less risky than Gen Digital. It trades about 0.08 of its potential returns per unit of risk. Gen Digital is currently generating about 0.05 per unit of risk. If you would invest  2,097  in Porto Seguro SA on October 4, 2024 and sell it today you would earn a total of  1,525  from holding Porto Seguro SA or generate 72.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.59%
Values	Daily Returns

Porto Seguro SA  vs.  Gen Digital

Porto Seguro SA

Risk-Adjusted Performance

0 of 100

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.

Gen Digital

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gen Digital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Gen Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Porto Seguro and Gen Digital

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

The idea behind Porto Seguro SA and Gen Digital 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.