Correlation Between Fras Le and Santos Brasil
Can any of the company-specific risk be diversified away by investing in both Fras Le and Santos Brasil 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 Fras Le and Santos Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fras le SA and Santos Brasil Participaes, you can compare the effects of market volatilities on Fras Le and Santos Brasil 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 Fras Le with a short position of Santos Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Santos Brasil.
Diversification Opportunities for Fras Le and Santos Brasil
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fras and Santos is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Santos Brasil Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos Brasil Participaes and Fras Le 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 Fras le SA are associated (or correlated) with Santos Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos Brasil Participaes has no effect on the direction of Fras Le i.e., Fras Le and Santos Brasil go up and down completely randomly.
Pair Corralation between Fras Le and Santos Brasil
Assuming the 90 days trading horizon Fras le SA is expected to under-perform the Santos Brasil. In addition to that, Fras Le is 5.55 times more volatile than Santos Brasil Participaes. It trades about -0.25 of its total potential returns per unit of risk. Santos Brasil Participaes is currently generating about 0.27 per unit of volatility. If you would invest 1,259 in Santos Brasil Participaes on August 31, 2024 and sell it today you would earn a total of 24.00 from holding Santos Brasil Participaes or generate 1.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Fras le SA vs. Santos Brasil Participaes
Performance |
| Timeline |
| Fras le SA |
| Santos Brasil Participaes |
Fras Le and Santos Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fras Le and Santos Brasil
The main advantage of trading using opposite Fras Le and Santos Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le position performs unexpectedly, Santos Brasil 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 Santos Brasil will offset losses from the drop in Santos Brasil's long position.The idea behind Fras le SA and Santos Brasil Participaes 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.| Santos Brasil vs. METISA Metalrgica Timboense | Santos Brasil vs. Lupatech SA | Santos Brasil vs. Fras le SA | Santos Brasil vs. Energisa SA |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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