Correlation Between Grendene and Gafisa SA
Can any of the company-specific risk be diversified away by investing in both Grendene and Gafisa 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 Grendene and Gafisa SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grendene SA and Gafisa SA, you can compare the effects of market volatilities on Grendene and Gafisa 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 Grendene with a short position of Gafisa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grendene and Gafisa SA.
Diversification Opportunities for Grendene and Gafisa SA
Very poor diversification
The 3 months correlation between Grendene and Gafisa is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Grendene SA and Gafisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gafisa SA and Grendene 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 Grendene SA are associated (or correlated) with Gafisa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gafisa SA has no effect on the direction of Grendene i.e., Grendene and Gafisa SA go up and down completely randomly.
Pair Corralation between Grendene and Gafisa SA
Assuming the 90 days trading horizon Grendene SA is expected to generate 0.26 times more return on investment than Gafisa SA. However, Grendene SA is 3.86 times less risky than Gafisa SA. It trades about -0.03 of its potential returns per unit of risk. Gafisa SA is currently generating about -0.06 per unit of risk. If you would invest 629.00 in Grendene SA on September 14, 2024 and sell it today you would lose (101.00) from holding Grendene SA or give up 16.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grendene SA vs. Gafisa SA
Performance |
| Timeline |
| Grendene SA |
| Gafisa SA |
Grendene and Gafisa SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grendene and Gafisa SA
The main advantage of trading using opposite Grendene and Gafisa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grendene position performs unexpectedly, Gafisa 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 Gafisa SA will offset losses from the drop in Gafisa SA's long position.| Grendene vs. M Dias Branco | Grendene vs. Fleury SA | Grendene vs. Engie Brasil Energia | Grendene vs. Odontoprev SA |
| Gafisa SA vs. Tupy SA | Gafisa SA vs. Engie Brasil Energia | Gafisa SA vs. Grendene SA | Gafisa SA 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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