Correlation Between Sp Downtown and PBG SA

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

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

Diversification Opportunities for Sp Downtown and PBG SA

0.01

Correlation Coefficient

Sp Downtown  PBG SA

Significant diversification

The 3 months correlation between SPTW11 and PBG is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sp Downtown Fundo and PBG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBG SA and Sp Downtown 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 Sp Downtown Fundo are associated (or correlated) with PBG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBG SA has no effect on the direction of Sp Downtown i.e., Sp Downtown and PBG SA go up and down completely randomly.

Pair Corralation between Sp Downtown and PBG SA

Assuming the 90 days trading horizon Sp Downtown Fundo is expected to generate 0.46 times more return on investment than PBG SA. However, Sp Downtown Fundo is 2.16 times less risky than PBG SA. It trades about -0.05 of its potential returns per unit of risk. PBG SA is currently generating about -0.05 per unit of risk. If you would invest  3,473  in Sp Downtown Fundo on November 29, 2024 and sell it today you would lose (187.00) from holding Sp Downtown Fundo or give up 5.38% of portfolio value over 90 days.

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

Sp Downtown Fundo  vs.  PBG SA

Sp Downtown Fundo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp Downtown Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Sp Downtown is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PBG SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days PBG SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sp Downtown and PBG SA

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

The idea behind Sp Downtown Fundo and PBG 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.