Correlation Between REN Redes and Semapa

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

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

Diversification Opportunities for REN Redes and Semapa

0.03

Correlation Coefficient

REN Redes  Semapa

Significant diversification

The 3 months correlation between REN and Semapa is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding REN Redes and Semapa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semapa and REN Redes 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 REN Redes are associated (or correlated) with Semapa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semapa has no effect on the direction of REN Redes i.e., REN Redes and Semapa go up and down completely randomly.

Pair Corralation between REN Redes and Semapa

Assuming the 90 days trading horizon REN Redes is expected to generate 0.95 times more return on investment than Semapa. However, REN Redes is 1.05 times less risky than Semapa. It trades about -0.05 of its potential returns per unit of risk. Semapa is currently generating about -0.23 per unit of risk. If you would invest  238.00  in REN Redes on September 16, 2024 and sell it today you would lose (2.00) from holding REN Redes or give up 0.84% of portfolio value over 90 days.

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

REN Redes  vs.  Semapa

REN Redes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REN Redes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, REN Redes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Semapa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semapa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Semapa is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with REN Redes and Semapa

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

The idea behind REN Redes and Semapa 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.