Correlation Between GAEC Educacao and Bahema Educao
Can any of the company-specific risk be diversified away by investing in both GAEC Educacao and Bahema Educao 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 GAEC Educacao and Bahema Educao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GAEC Educacao SA and Bahema Educao SA, you can compare the effects of market volatilities on GAEC Educacao and Bahema Educao 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 GAEC Educacao with a short position of Bahema Educao. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAEC Educacao and Bahema Educao.
Diversification Opportunities for GAEC Educacao and Bahema Educao
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GAEC and Bahema is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding GAEC Educacao SA and Bahema Educao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bahema Educao SA and GAEC Educacao 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 GAEC Educacao SA are associated (or correlated) with Bahema Educao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bahema Educao SA has no effect on the direction of GAEC Educacao i.e., GAEC Educacao and Bahema Educao go up and down completely randomly.
Pair Corralation between GAEC Educacao and Bahema Educao
Assuming the 90 days trading horizon GAEC Educacao SA is expected to generate 0.98 times more return on investment than Bahema Educao. However, GAEC Educacao SA is 1.02 times less risky than Bahema Educao. It trades about 0.01 of its potential returns per unit of risk. Bahema Educao SA is currently generating about -0.02 per unit of risk. If you would invest 351.00 in GAEC Educacao SA on August 30, 2024 and sell it today you would lose (111.00) from holding GAEC Educacao SA or give up 31.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
GAEC Educacao SA vs. Bahema Educao SA
Performance |
| Timeline |
| GAEC Educacao SA |
| Bahema Educao SA |
GAEC Educacao and Bahema Educao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GAEC Educacao and Bahema Educao
The main advantage of trading using opposite GAEC Educacao and Bahema Educao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAEC Educacao position performs unexpectedly, Bahema Educao 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 Bahema Educao will offset losses from the drop in Bahema Educao's long position.The idea behind GAEC Educacao SA and Bahema Educao 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.| Bahema Educao vs. Biomm SA | Bahema Educao vs. GAEC Educacao SA | Bahema Educao vs. T4F Entretenimento SA | Bahema Educao vs. Ser Educacional Sa |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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