Correlation Between Raia Drogasil and TOTVS SA

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

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

Diversification Opportunities for Raia Drogasil and TOTVS SA

-0.8

Correlation Coefficient

Raia Drogasil  TOTVS SA

Pay attention - limited upside

The 3 months correlation between Raia and TOTVS is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Raia Drogasil SA and TOTVS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTVS SA and Raia Drogasil 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 Raia Drogasil SA are associated (or correlated) with TOTVS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTVS SA has no effect on the direction of Raia Drogasil i.e., Raia Drogasil and TOTVS SA go up and down completely randomly.

Pair Corralation between Raia Drogasil and TOTVS SA

Assuming the 90 days trading horizon Raia Drogasil SA is expected to under-perform the TOTVS SA. In addition to that, Raia Drogasil is 1.13 times more volatile than TOTVS SA. It trades about -0.08 of its total potential returns per unit of risk. TOTVS SA is currently generating about 0.19 per unit of volatility. If you would invest  2,664  in TOTVS SA on December 30, 2024 and sell it today you would earn a total of  676.00  from holding TOTVS SA or generate 25.38% return on investment over 90 days.

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

Raia Drogasil SA  vs.  TOTVS SA

Raia Drogasil SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Raia Drogasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

TOTVS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TOTVS SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TOTVS SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Raia Drogasil and TOTVS SA

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

The idea behind Raia Drogasil SA and TOTVS 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.