Correlation Between Recrusul and Paranapanema

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

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

Diversification Opportunities for Recrusul and Paranapanema

-0.89

Correlation Coefficient

Recrusul  Paranapanema

Pay attention - limited upside

The 3 months correlation between Recrusul and Paranapanema is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Recrusul SA and Paranapanema SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paranapanema SA and Recrusul 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 Recrusul SA are associated (or correlated) with Paranapanema. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paranapanema SA has no effect on the direction of Recrusul i.e., Recrusul and Paranapanema go up and down completely randomly.

Pair Corralation between Recrusul and Paranapanema

Assuming the 90 days trading horizon Recrusul SA is expected to under-perform the Paranapanema. In addition to that, Recrusul is 2.85 times more volatile than Paranapanema SA. It trades about -0.13 of its total potential returns per unit of risk. Paranapanema SA is currently generating about -0.08 per unit of volatility. If you would invest  106.00  in Paranapanema SA on September 4, 2024 and sell it today you would lose (6.00) from holding Paranapanema SA or give up 5.66% of portfolio value over 90 days.

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

Recrusul SA  vs.  Paranapanema SA

Recrusul SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Recrusul SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Recrusul unveiled solid returns over the last few months and may actually be approaching a breakup point.

Paranapanema SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paranapanema 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 Recrusul and Paranapanema

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

The idea behind Recrusul SA and Paranapanema 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 Anywhere module to track or share privately all of your investments from the convenience of any device.