Correlation Between TOTVS SA and Gol Linhas

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

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

Diversification Opportunities for TOTVS SA and Gol Linhas

-0.22

Correlation Coefficient

TOTVS SA  Gol Linhas

Very good diversification

The 3 months correlation between TOTVS and Gol is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding TOTVS SA and Gol Linhas Areas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gol Linhas Areas and TOTVS 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 TOTVS SA are associated (or correlated) with Gol Linhas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gol Linhas Areas has no effect on the direction of TOTVS SA i.e., TOTVS SA and Gol Linhas go up and down completely randomly.

Pair Corralation between TOTVS SA and Gol Linhas

Assuming the 90 days trading horizon TOTVS SA is expected to generate 0.61 times more return on investment than Gol Linhas. However, TOTVS SA is 1.64 times less risky than Gol Linhas. It trades about 0.19 of its potential returns per unit of risk. Gol Linhas Areas is currently generating about 0.05 per unit of risk. If you would invest  2,664  in TOTVS SA on December 30, 2024 and sell it today you would earn a total of  676.00  from holding TOTVS SA or generate 25.38% return on investment over 90 days.

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

TOTVS SA  vs.  Gol Linhas Areas

TOTVS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TOTVS SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TOTVS SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gol Linhas Areas

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gol Linhas Areas are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gol Linhas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TOTVS SA and Gol Linhas

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

The idea behind TOTVS SA and Gol Linhas Areas 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.