Correlation Between Seven I and Sendas Distribuidora

Can any of the company-specific risk be diversified away by investing in both Seven I and Sendas Distribuidora 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 Seven I and Sendas Distribuidora into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Seven i Holdings and Sendas Distribuidora SA, you can compare the effects of market volatilities on Seven I and Sendas Distribuidora 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 Seven I with a short position of Sendas Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seven I and Sendas Distribuidora.

Diversification Opportunities for Seven I and Sendas Distribuidora

0.76

Correlation Coefficient

Seven I  Sendas Distribuidora

Poor diversification

The 3 months correlation between Seven and Sendas is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Seven i Holdings and Sendas Distribuidora SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sendas Distribuidora and Seven I 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 Seven i Holdings are associated (or correlated) with Sendas Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sendas Distribuidora has no effect on the direction of Seven I i.e., Seven I and Sendas Distribuidora go up and down completely randomly.

Pair Corralation between Seven I and Sendas Distribuidora

Assuming the 90 days horizon Seven i Holdings is expected to under-perform the Sendas Distribuidora. But the pink sheet apears to be less risky and, when comparing its historical volatility, Seven i Holdings is 1.23 times less risky than Sendas Distribuidora. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Sendas Distribuidora SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  447.00  in Sendas Distribuidora SA on December 28, 2024 and sell it today you would earn a total of  13.00  from holding Sendas Distribuidora SA or generate 2.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	15.0%
Values	Daily Returns

Seven i Holdings  vs.  Sendas Distribuidora SA

Seven i Holdings

Risk-Adjusted Performance

Very Weak

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

Sendas Distribuidora

Risk-Adjusted Performance

OK

Over the last 90 days Sendas Distribuidora SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak basic indicators, Sendas Distribuidora demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seven I and Sendas Distribuidora

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

The idea behind Seven i Holdings and Sendas Distribuidora 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.