Correlation Between BB Seguridade and Companhia
Can any of the company-specific risk be diversified away by investing in both BB Seguridade and Companhia 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 BB Seguridade and Companhia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BB Seguridade Participacoes and Companhia de Saneamento, you can compare the effects of market volatilities on BB Seguridade and Companhia 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 BB Seguridade with a short position of Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of BB Seguridade and Companhia.
Diversification Opportunities for BB Seguridade and Companhia
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BBSE3 and Companhia is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BB Seguridade Participacoes and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento and BB Seguridade 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 BB Seguridade Participacoes are associated (or correlated) with Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of BB Seguridade i.e., BB Seguridade and Companhia go up and down completely randomly.
Pair Corralation between BB Seguridade and Companhia
Assuming the 90 days trading horizon BB Seguridade is expected to generate 2.09 times less return on investment than Companhia. But when comparing it to its historical volatility, BB Seguridade Participacoes is 1.06 times less risky than Companhia. It trades about 0.04 of its potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,666 in Companhia de Saneamento on August 24, 2024 and sell it today you would earn a total of 4,014 from holding Companhia de Saneamento or generate 70.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BB Seguridade Participacoes vs. Companhia de Saneamento
Performance |
| Timeline |
| BB Seguridade Partic |
| Companhia de Saneamento |
BB Seguridade and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BB Seguridade and Companhia
The main advantage of trading using opposite BB Seguridade and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BB Seguridade position performs unexpectedly, Companhia 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 Companhia will offset losses from the drop in Companhia's long position.| BB Seguridade vs. Transmissora Aliana de | BB Seguridade vs. Banco do Brasil | BB Seguridade vs. Itasa Investimentos | BB Seguridade vs. Engie Brasil Energia |
| Companhia vs. BB Seguridade Participacoes | Companhia vs. Engie Brasil Energia | Companhia vs. CTEEP Companhia | Companhia vs. Itasa Investimentos |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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