Correlation Between Financeira Alfa and WEG SA
Can any of the company-specific risk be diversified away by investing in both Financeira Alfa and WEG SA 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 Financeira Alfa and WEG SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financeira Alfa SA and WEG SA, you can compare the effects of market volatilities on Financeira Alfa and WEG SA 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 Financeira Alfa with a short position of WEG SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financeira Alfa and WEG SA.
Diversification Opportunities for Financeira Alfa and WEG SA
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Financeira and WEG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Financeira Alfa SA and WEG SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEG SA and Financeira Alfa 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 Financeira Alfa SA are associated (or correlated) with WEG SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEG SA has no effect on the direction of Financeira Alfa i.e., Financeira Alfa and WEG SA go up and down completely randomly.
Pair Corralation between Financeira Alfa and WEG SA
Assuming the 90 days trading horizon Financeira Alfa is expected to generate 1.3 times less return on investment than WEG SA. But when comparing it to its historical volatility, Financeira Alfa SA is 1.24 times less risky than WEG SA. It trades about 0.06 of its potential returns per unit of risk. WEG SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,769 in WEG SA on September 12, 2024 and sell it today you would earn a total of 1,919 from holding WEG SA or generate 50.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Financeira Alfa SA vs. WEG SA
Performance |
| Timeline |
| Financeira Alfa SA |
| WEG SA |
Financeira Alfa and WEG SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financeira Alfa and WEG SA
The main advantage of trading using opposite Financeira Alfa and WEG SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financeira Alfa position performs unexpectedly, WEG SA 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 WEG SA will offset losses from the drop in WEG SA's long position.| Financeira Alfa vs. Banco Bradesco SA | Financeira Alfa vs. Petrleo Brasileiro SA | Financeira Alfa vs. Ita Unibanco Holding | Financeira Alfa 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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