Correlation Between Companhia and Direcional Engenharia
Can any of the company-specific risk be diversified away by investing in both Companhia and Direcional Engenharia 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 and Direcional Engenharia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia de Gs and Direcional Engenharia SA, you can compare the effects of market volatilities on Companhia and Direcional Engenharia 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 with a short position of Direcional Engenharia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Direcional Engenharia.
Diversification Opportunities for Companhia and Direcional Engenharia
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Companhia and Direcional is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Gs and Direcional Engenharia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direcional Engenharia and 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 Companhia de Gs are associated (or correlated) with Direcional Engenharia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direcional Engenharia has no effect on the direction of Companhia i.e., Companhia and Direcional Engenharia go up and down completely randomly.
Pair Corralation between Companhia and Direcional Engenharia
Assuming the 90 days trading horizon Companhia is expected to generate 1.55 times less return on investment than Direcional Engenharia. In addition to that, Companhia is 1.61 times more volatile than Direcional Engenharia SA. It trades about 0.03 of its total potential returns per unit of risk. Direcional Engenharia SA is currently generating about 0.08 per unit of volatility. If you would invest 2,318 in Direcional Engenharia SA on August 30, 2024 and sell it today you would earn a total of 478.00 from holding Direcional Engenharia SA or generate 20.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Gs vs. Direcional Engenharia SA
Performance |
| Timeline |
| Companhia de Gs |
| Direcional Engenharia |
Companhia and Direcional Engenharia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and Direcional Engenharia
The main advantage of trading using opposite Companhia and Direcional Engenharia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia position performs unexpectedly, Direcional Engenharia 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 Direcional Engenharia will offset losses from the drop in Direcional Engenharia's long position.| Companhia vs. Centrais Eltricas Brasileiras | Companhia vs. Companhia Energtica de | Companhia vs. Companhia de Saneamento | Companhia vs. Braskem SA |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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