Correlation Between Companhia Brasileira and Lojas Renner
Can any of the company-specific risk be diversified away by investing in both Companhia Brasileira and Lojas Renner 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 Companhia Brasileira and Lojas Renner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia Brasileira De and Lojas Renner SA, you can compare the effects of market volatilities on Companhia Brasileira and Lojas Renner 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 Companhia Brasileira with a short position of Lojas Renner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Brasileira and Lojas Renner.
Diversification Opportunities for Companhia Brasileira and Lojas Renner
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Companhia and Lojas is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Brasileira De and Lojas Renner SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lojas Renner SA and Companhia Brasileira 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 Companhia Brasileira De are associated (or correlated) with Lojas Renner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lojas Renner SA has no effect on the direction of Companhia Brasileira i.e., Companhia Brasileira and Lojas Renner go up and down completely randomly.
Pair Corralation between Companhia Brasileira and Lojas Renner
If you would invest 411.00 in Lojas Renner SA on November 2, 2024 and sell it today you would earn a total of 0.00 from holding Lojas Renner SA or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia Brasileira De vs. Lojas Renner SA
Performance |
| Timeline |
| Companhia Brasileira |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Lojas Renner SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Companhia Brasileira and Lojas Renner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia Brasileira and Lojas Renner
The main advantage of trading using opposite Companhia Brasileira and Lojas Renner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Brasileira position performs unexpectedly, Lojas Renner 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 Lojas Renner will offset losses from the drop in Lojas Renner's long position.The idea behind Companhia Brasileira De and Lojas Renner 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.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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