Correlation Between Electro Ao and Companhia Tecidos
Can any of the company-specific risk be diversified away by investing in both Electro Ao and Companhia Tecidos 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 Electro Ao and Companhia Tecidos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electro Ao Altona and Companhia Tecidos Santanense, you can compare the effects of market volatilities on Electro Ao and Companhia Tecidos 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 Electro Ao with a short position of Companhia Tecidos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electro Ao and Companhia Tecidos.
Diversification Opportunities for Electro Ao and Companhia Tecidos
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Electro and Companhia is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Electro Ao Altona and Companhia Tecidos Santanense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Tecidos and Electro Ao 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 Electro Ao Altona are associated (or correlated) with Companhia Tecidos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Tecidos has no effect on the direction of Electro Ao i.e., Electro Ao and Companhia Tecidos go up and down completely randomly.
Pair Corralation between Electro Ao and Companhia Tecidos
Assuming the 90 days trading horizon Electro Ao is expected to generate 1.16 times less return on investment than Companhia Tecidos. But when comparing it to its historical volatility, Electro Ao Altona is 3.92 times less risky than Companhia Tecidos. It trades about 0.07 of its potential returns per unit of risk. Companhia Tecidos Santanense is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 280.00 in Companhia Tecidos Santanense on September 14, 2024 and sell it today you would lose (115.00) from holding Companhia Tecidos Santanense or give up 41.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electro Ao Altona vs. Companhia Tecidos Santanense
Performance |
| Timeline |
| Electro Ao Altona |
| Companhia Tecidos |
Electro Ao and Companhia Tecidos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electro Ao and Companhia Tecidos
The main advantage of trading using opposite Electro Ao and Companhia Tecidos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electro Ao position performs unexpectedly, Companhia Tecidos 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 Tecidos will offset losses from the drop in Companhia Tecidos' long position.| Electro Ao vs. Usinas Siderrgicas de | Electro Ao vs. Gerdau SA | Electro Ao vs. Companhia Siderrgica Nacional | Electro Ao vs. Companhia Energtica de |
| Companhia Tecidos vs. Tupy SA | Companhia Tecidos vs. Engie Brasil Energia | Companhia Tecidos vs. Grendene SA | Companhia Tecidos vs. M Dias Branco |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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