Correlation Between Companhia Siderrgica and Randon SA
Can any of the company-specific risk be diversified away by investing in both Companhia Siderrgica and Randon 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 Companhia Siderrgica and Randon SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia Siderrgica Nacional and Randon SA Implementos, you can compare the effects of market volatilities on Companhia Siderrgica and Randon 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 Companhia Siderrgica with a short position of Randon SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Siderrgica and Randon SA.
Diversification Opportunities for Companhia Siderrgica and Randon SA
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Companhia and Randon is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderrgica Nacional and Randon SA Implementos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Randon SA Implementos and Companhia Siderrgica 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 Siderrgica Nacional are associated (or correlated) with Randon SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Randon SA Implementos has no effect on the direction of Companhia Siderrgica i.e., Companhia Siderrgica and Randon SA go up and down completely randomly.
Pair Corralation between Companhia Siderrgica and Randon SA
Assuming the 90 days trading horizon Companhia Siderrgica Nacional is expected to generate 2.31 times more return on investment than Randon SA. However, Companhia Siderrgica is 2.31 times more volatile than Randon SA Implementos. It trades about 0.01 of its potential returns per unit of risk. Randon SA Implementos is currently generating about 0.01 per unit of risk. If you would invest 1,120 in Companhia Siderrgica Nacional on August 30, 2024 and sell it today you would lose (1.00) from holding Companhia Siderrgica Nacional or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia Siderrgica Nacional vs. Randon SA Implementos
Performance |
| Timeline |
| Companhia Siderrgica |
| Randon SA Implementos |
Companhia Siderrgica and Randon SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia Siderrgica and Randon SA
The main advantage of trading using opposite Companhia Siderrgica and Randon SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Siderrgica position performs unexpectedly, Randon 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 Randon SA will offset losses from the drop in Randon SA's long position.The idea behind Companhia Siderrgica Nacional and Randon SA Implementos 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.
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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