Correlation Between T4F Entretenimento and Manufatura

Can any of the company-specific risk be diversified away by investing in both T4F Entretenimento and Manufatura 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 T4F Entretenimento and Manufatura into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T4F Entretenimento SA and Manufatura de Brinquedos, you can compare the effects of market volatilities on T4F Entretenimento and Manufatura 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 T4F Entretenimento with a short position of Manufatura. Check out your portfolio center. Please also check ongoing floating volatility patterns of T4F Entretenimento and Manufatura.

Diversification Opportunities for T4F Entretenimento and Manufatura

0.0

Correlation Coefficient

T4F Entretenimento  Manufatura

Pay attention - limited upside

The 3 months correlation between T4F and Manufatura is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding T4F Entretenimento SA and Manufatura de Brinquedos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manufatura de Brinquedos and T4F Entretenimento 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 T4F Entretenimento SA are associated (or correlated) with Manufatura. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manufatura de Brinquedos has no effect on the direction of T4F Entretenimento i.e., T4F Entretenimento and Manufatura go up and down completely randomly.

Pair Corralation between T4F Entretenimento and Manufatura

Assuming the 90 days trading horizon T4F Entretenimento SA is expected to under-perform the Manufatura. But the stock apears to be less risky and, when comparing its historical volatility, T4F Entretenimento SA is 10.79 times less risky than Manufatura. The stock trades about -0.04 of its potential returns per unit of risk. The Manufatura de Brinquedos is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Manufatura de Brinquedos on October 11, 2024 and sell it today you would earn a total of  360.00  from holding Manufatura de Brinquedos or generate 90.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

T4F Entretenimento SA  vs.  Manufatura de Brinquedos

T4F Entretenimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T4F Entretenimento 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Manufatura de Brinquedos

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with T4F Entretenimento and Manufatura

The main advantage of trading using opposite T4F Entretenimento and Manufatura positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T4F Entretenimento position performs unexpectedly, Manufatura 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 Manufatura will offset losses from the drop in Manufatura's long position.

The idea behind T4F Entretenimento SA and Manufatura de Brinquedos 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.