Correlation Between Companhia Siderurgica and PM Capital

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

By analyzing existing cross correlation between Companhia Siderurgica Nacional and PM Capital Global, you can compare the effects of market volatilities on Companhia Siderurgica and PM Capital 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 Companhia Siderurgica with a short position of PM Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Siderurgica and PM Capital.

Diversification Opportunities for Companhia Siderurgica and PM Capital

0.33

Correlation Coefficient

Companhia Siderurgica  PM Capital

Weak diversification

The 3 months correlation between Companhia and PGF is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderurgica Nacional and PM Capital Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PM Capital Global and Companhia Siderurgica 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 Companhia Siderurgica Nacional are associated (or correlated) with PM Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PM Capital Global has no effect on the direction of Companhia Siderurgica i.e., Companhia Siderurgica and PM Capital go up and down completely randomly.

Pair Corralation between Companhia Siderurgica and PM Capital

Considering the 90-day investment horizon Companhia Siderurgica Nacional is expected to generate 2.27 times more return on investment than PM Capital. However, Companhia Siderurgica is 2.27 times more volatile than PM Capital Global. It trades about 0.11 of its potential returns per unit of risk. PM Capital Global is currently generating about 0.16 per unit of risk. If you would invest  147.00  in Companhia Siderurgica Nacional on December 22, 2024 and sell it today you would earn a total of  30.00  from holding Companhia Siderurgica Nacional or generate 20.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Companhia Siderurgica Nacional  vs.  PM Capital Global

Companhia Siderurgica

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Siderurgica Nacional are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Companhia Siderurgica exhibited solid returns over the last few months and may actually be approaching a breakup point.

PM Capital Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PM Capital Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, PM Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Companhia Siderurgica and PM Capital

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

The idea behind Companhia Siderurgica Nacional and PM Capital Global 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.