Correlation Between WEG SA and Recrusul

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

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

Diversification Opportunities for WEG SA and Recrusul

-0.03

Correlation Coefficient

WEG SA  Recrusul

Good diversification

The 3 months correlation between WEG and Recrusul is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding WEG SA and Recrusul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recrusul SA and WEG 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 WEG SA are associated (or correlated) with Recrusul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recrusul SA has no effect on the direction of WEG SA i.e., WEG SA and Recrusul go up and down completely randomly.

Pair Corralation between WEG SA and Recrusul

Assuming the 90 days trading horizon WEG SA is expected to generate 0.21 times more return on investment than Recrusul. However, WEG SA is 4.78 times less risky than Recrusul. It trades about -0.01 of its potential returns per unit of risk. Recrusul SA is currently generating about -0.04 per unit of risk. If you would invest  5,612  in WEG SA on September 23, 2024 and sell it today you would lose (58.00) from holding WEG SA or give up 1.03% of portfolio value over 90 days.

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

WEG SA  vs.  Recrusul SA

WEG SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WEG SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WEG SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Recrusul SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Recrusul SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Recrusul unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WEG SA and Recrusul

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

The idea behind WEG SA and Recrusul 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.