Correlation Between PBG SA and GAEC Educacao

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

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

Diversification Opportunities for PBG SA and GAEC Educacao

0.72

Correlation Coefficient

PBG SA  GAEC Educacao

Poor diversification

The 3 months correlation between PBG and GAEC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PBG SA and GAEC Educacao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAEC Educacao SA and PBG SA 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 PBG SA are associated (or correlated) with GAEC Educacao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAEC Educacao SA has no effect on the direction of PBG SA i.e., PBG SA and GAEC Educacao go up and down completely randomly.

Pair Corralation between PBG SA and GAEC Educacao

Assuming the 90 days trading horizon PBG SA is expected to generate 0.73 times more return on investment than GAEC Educacao. However, PBG SA is 1.38 times less risky than GAEC Educacao. It trades about -0.05 of its potential returns per unit of risk. GAEC Educacao SA is currently generating about -0.08 per unit of risk. If you would invest  461.00  in PBG SA on September 29, 2024 and sell it today you would lose (105.00) from holding PBG SA or give up 22.78% of portfolio value over 90 days.

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

PBG SA  vs.  GAEC Educacao SA

PBG SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PBG SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.

GAEC Educacao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAEC Educacao 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.

Pair Trading with PBG SA and GAEC Educacao

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

The idea behind PBG SA and GAEC Educacao 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.