Correlation Between Rossi Residencial and Eternit SA

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

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

Diversification Opportunities for Rossi Residencial and Eternit SA

0.42

Correlation Coefficient

Rossi Residencial  Eternit SA

Very weak diversification

The 3 months correlation between Rossi and Eternit is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Rossi Residencial SA and Eternit SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternit SA and Rossi Residencial 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 Rossi Residencial SA are associated (or correlated) with Eternit SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternit SA has no effect on the direction of Rossi Residencial i.e., Rossi Residencial and Eternit SA go up and down completely randomly.

Pair Corralation between Rossi Residencial and Eternit SA

Assuming the 90 days trading horizon Rossi Residencial SA is expected to generate 1.74 times more return on investment than Eternit SA. However, Rossi Residencial is 1.74 times more volatile than Eternit SA. It trades about 0.03 of its potential returns per unit of risk. Eternit SA is currently generating about -0.1 per unit of risk. If you would invest  304.00  in Rossi Residencial SA on November 29, 2024 and sell it today you would earn a total of  6.00  from holding Rossi Residencial SA or generate 1.97% return on investment over 90 days.

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

Rossi Residencial SA  vs.  Eternit SA

Rossi Residencial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rossi Residencial SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Rossi Residencial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Eternit SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eternit 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.

Pair Trading with Rossi Residencial and Eternit SA

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

The idea behind Rossi Residencial SA and Eternit 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.