Correlation Between Companhia Siderrgica and SPDR Series

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

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

Diversification Opportunities for Companhia Siderrgica and SPDR Series

-0.41

Correlation Coefficient

Companhia Siderrgica  SPDR Series

Very good diversification

The 3 months correlation between Companhia and SPDR is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderrgica Nacional and SPDR Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Series Trust and Companhia Siderrgica 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 Siderrgica Nacional are associated (or correlated) with SPDR Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Series Trust has no effect on the direction of Companhia Siderrgica i.e., Companhia Siderrgica and SPDR Series go up and down completely randomly.

Pair Corralation between Companhia Siderrgica and SPDR Series

Assuming the 90 days trading horizon Companhia Siderrgica is expected to generate 2.28 times less return on investment than SPDR Series. In addition to that, Companhia Siderrgica is 2.16 times more volatile than SPDR Series Trust. It trades about 0.01 of its total potential returns per unit of risk. SPDR Series Trust is currently generating about 0.03 per unit of volatility. If you would invest  262,766  in SPDR Series Trust on December 30, 2024 and sell it today you would earn a total of  7,434  from holding SPDR Series Trust or generate 2.83% return on investment over 90 days.

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

Companhia Siderrgica Nacional  vs.  SPDR Series Trust

Companhia Siderrgica

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia Siderrgica Nacional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Companhia Siderrgica is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR Series Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Series Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Companhia Siderrgica and SPDR Series

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

The idea behind Companhia Siderrgica Nacional and SPDR Series Trust 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 Transaction History module to view history of all your transactions and understand their impact on performance.