Correlation Between Companhia Siderurgica and Invesco DB

Can any of the company-specific risk be diversified away by investing in both Companhia Siderurgica and Invesco DB 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 Invesco DB 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 Invesco DB Dollar, you can compare the effects of market volatilities on Companhia Siderurgica and Invesco DB 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 Invesco DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Siderurgica and Invesco DB.

Diversification Opportunities for Companhia Siderurgica and Invesco DB

0.64

Correlation Coefficient

Companhia Siderurgica  Invesco DB

Poor diversification

The 3 months correlation between Companhia and Invesco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderurgica Nacional and Invesco DB Dollar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Dollar 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 Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Dollar has no effect on the direction of Companhia Siderurgica i.e., Companhia Siderurgica and Invesco DB go up and down completely randomly.

Pair Corralation between Companhia Siderurgica and Invesco DB

Considering the 90-day investment horizon Companhia Siderurgica Nacional is expected to generate 6.8 times more return on investment than Invesco DB. However, Companhia Siderurgica is 6.8 times more volatile than Invesco DB Dollar. It trades about 0.11 of its potential returns per unit of risk. Invesco DB Dollar is currently generating about 0.14 per unit of risk. If you would invest  144.00  in Companhia Siderurgica Nacional on December 27, 2024 and sell it today you would earn a total of  30.00  from holding Companhia Siderurgica Nacional or generate 20.83% return on investment over 90 days.

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

Companhia Siderurgica Nacional  vs.  Invesco DB Dollar

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.

Invesco DB Dollar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Dollar are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Invesco DB is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Companhia Siderurgica and Invesco DB

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

The idea behind Companhia Siderurgica Nacional and Invesco DB Dollar 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.