Correlation Between Fras Le and Votorantim Securities
Can any of the company-specific risk be diversified away by investing in both Fras Le and Votorantim Securities 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 Votorantim Securities 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 Votorantim Securities Master, you can compare the effects of market volatilities on Fras Le and Votorantim Securities 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 Votorantim Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Votorantim Securities.
Diversification Opportunities for Fras Le and Votorantim Securities
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fras and Votorantim is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Votorantim Securities Master in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Votorantim Securities 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 Votorantim Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Votorantim Securities has no effect on the direction of Fras Le i.e., Fras Le and Votorantim Securities go up and down completely randomly.
Pair Corralation between Fras Le and Votorantim Securities
Assuming the 90 days trading horizon Fras le SA is expected to under-perform the Votorantim Securities. But the stock apears to be less risky and, when comparing its historical volatility, Fras le SA is 1.33 times less risky than Votorantim Securities. The stock trades about -0.18 of its potential returns per unit of risk. The Votorantim Securities Master is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,271 in Votorantim Securities Master on September 5, 2024 and sell it today you would earn a total of 48.00 from holding Votorantim Securities Master or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Fras le SA vs. Votorantim Securities Master
Performance |
| Timeline |
| Fras le SA |
| Votorantim Securities |
Fras Le and Votorantim Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fras Le and Votorantim Securities
The main advantage of trading using opposite Fras Le and Votorantim Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le position performs unexpectedly, Votorantim Securities 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 Votorantim Securities will offset losses from the drop in Votorantim Securities' long position.The idea behind Fras le SA and Votorantim Securities Master 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.| Votorantim Securities vs. Fras le SA | Votorantim Securities vs. Western Digital | Votorantim Securities vs. Clave Indices De | Votorantim Securities vs. BTG Pactual Logstica |
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 CEOs Directory module to screen CEOs from public companies around the world.
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