Correlation Between Grendene and M Dias
Can any of the company-specific risk be diversified away by investing in both Grendene and M Dias 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 M Dias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grendene SA and M Dias Branco, you can compare the effects of market volatilities on Grendene and M Dias 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 M Dias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grendene and M Dias.
Diversification Opportunities for Grendene and M Dias
Very poor diversification
The 3 months correlation between Grendene and MDIA3 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Grendene SA and M Dias Branco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Dias Branco 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 M Dias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Dias Branco has no effect on the direction of Grendene i.e., Grendene and M Dias go up and down completely randomly.
Pair Corralation between Grendene and M Dias
Assuming the 90 days trading horizon Grendene is expected to generate 1.28 times less return on investment than M Dias. In addition to that, Grendene is 1.02 times more volatile than M Dias Branco. It trades about 0.01 of its total potential returns per unit of risk. M Dias Branco is currently generating about 0.01 per unit of volatility. If you would invest 2,428 in M Dias Branco on August 24, 2024 and sell it today you would lose (49.00) from holding M Dias Branco or give up 2.02% 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. M Dias Branco
Performance |
| Timeline |
| Grendene SA |
| M Dias Branco |
Grendene and M Dias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grendene and M Dias
The main advantage of trading using opposite Grendene and M Dias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grendene position performs unexpectedly, M Dias 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 M Dias will offset losses from the drop in M Dias' long position.| Grendene vs. M Dias Branco | Grendene vs. Fleury SA | Grendene vs. Engie Brasil Energia | Grendene vs. Odontoprev SA |
| M Dias vs. Minerva SA | M Dias vs. BRF SA | M Dias vs. Companhia Siderrgica Nacional | M Dias vs. Cyrela Brazil Realty |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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