Correlation Between BrasilAgro Companhia and So Martinho
Can any of the company-specific risk be diversified away by investing in both BrasilAgro Companhia and So Martinho 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 BrasilAgro Companhia and So Martinho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BrasilAgro Companhia and So Martinho SA, you can compare the effects of market volatilities on BrasilAgro Companhia and So Martinho 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 BrasilAgro Companhia with a short position of So Martinho. Check out your portfolio center. Please also check ongoing floating volatility patterns of BrasilAgro Companhia and So Martinho.
Diversification Opportunities for BrasilAgro Companhia and So Martinho
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BrasilAgro and SMTO3 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding BrasilAgro Companhia and So Martinho SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on So Martinho SA and BrasilAgro Companhia 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 BrasilAgro Companhia are associated (or correlated) with So Martinho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of So Martinho SA has no effect on the direction of BrasilAgro Companhia i.e., BrasilAgro Companhia and So Martinho go up and down completely randomly.
Pair Corralation between BrasilAgro Companhia and So Martinho
Assuming the 90 days trading horizon BrasilAgro Companhia is expected to generate 2.25 times less return on investment than So Martinho. In addition to that, BrasilAgro Companhia is 1.13 times more volatile than So Martinho SA. It trades about 0.01 of its total potential returns per unit of risk. So Martinho SA is currently generating about 0.01 per unit of volatility. If you would invest 2,255 in So Martinho SA on October 20, 2024 and sell it today you would earn a total of 44.00 from holding So Martinho SA or generate 1.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BrasilAgro Companhia vs. So Martinho SA
Performance |
| Timeline |
| BrasilAgro Companhia |
| So Martinho SA |
BrasilAgro Companhia and So Martinho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BrasilAgro Companhia and So Martinho
The main advantage of trading using opposite BrasilAgro Companhia and So Martinho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BrasilAgro Companhia position performs unexpectedly, So Martinho 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 So Martinho will offset losses from the drop in So Martinho's long position.| BrasilAgro Companhia vs. SLC Agrcola SA | BrasilAgro Companhia vs. Kepler Weber SA | BrasilAgro Companhia vs. Cia de Ferro | BrasilAgro Companhia vs. Tupy SA |
| So Martinho vs. JBS SA | So Martinho vs. Marfrig Global Foods | So Martinho vs. Ambev SA | So Martinho vs. Ita Unibanco Holding |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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