Correlation Between SIMPAR SA and Movida Participaes

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

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

Diversification Opportunities for SIMPAR SA and Movida Participaes

0.85

Correlation Coefficient

SIMPAR SA  Movida Participaes

Very poor diversification

The 3 months correlation between SIMPAR and Movida is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SIMPAR SA and Movida Participaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Movida Participaes and SIMPAR SA 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 SIMPAR SA are associated (or correlated) with Movida Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Movida Participaes has no effect on the direction of SIMPAR SA i.e., SIMPAR SA and Movida Participaes go up and down completely randomly.

Pair Corralation between SIMPAR SA and Movida Participaes

Assuming the 90 days trading horizon SIMPAR SA is expected to under-perform the Movida Participaes. But the stock apears to be less risky and, when comparing its historical volatility, SIMPAR SA is 1.22 times less risky than Movida Participaes. The stock trades about -0.11 of its potential returns per unit of risk. The Movida Participaes SA is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  689.00  in Movida Participaes SA on September 3, 2024 and sell it today you would lose (164.00) from holding Movida Participaes SA or give up 23.8% of portfolio value over 90 days.

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

SIMPAR SA  vs.  Movida Participaes SA

SIMPAR SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Movida Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SIMPAR SA and Movida Participaes

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

The idea behind SIMPAR SA and Movida Participaes 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..