Correlation Between Grendene and Magazine Luiza
Can any of the company-specific risk be diversified away by investing in both Grendene and Magazine Luiza 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 Magazine Luiza into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grendene SA and Magazine Luiza SA, you can compare the effects of market volatilities on Grendene and Magazine Luiza 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 Magazine Luiza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grendene and Magazine Luiza.
Diversification Opportunities for Grendene and Magazine Luiza
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Grendene and Magazine is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Grendene SA and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza 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 Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of Grendene i.e., Grendene and Magazine Luiza go up and down completely randomly.
Pair Corralation between Grendene and Magazine Luiza
Assuming the 90 days trading horizon Grendene SA is expected to generate 0.6 times more return on investment than Magazine Luiza. However, Grendene SA is 1.65 times less risky than Magazine Luiza. It trades about 0.09 of its potential returns per unit of risk. Magazine Luiza SA is currently generating about 0.0 per unit of risk. If you would invest 524.00 in Grendene SA on September 12, 2024 and sell it today you would earn a total of 21.00 from holding Grendene SA or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grendene SA vs. Magazine Luiza SA
Performance |
| Timeline |
| Grendene SA |
| Magazine Luiza SA |
Grendene and Magazine Luiza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grendene and Magazine Luiza
The main advantage of trading using opposite Grendene and Magazine Luiza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grendene position performs unexpectedly, Magazine Luiza 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 Magazine Luiza will offset losses from the drop in Magazine Luiza's long position.| Grendene vs. M Dias Branco | Grendene vs. Fleury SA | Grendene vs. Engie Brasil Energia | Grendene vs. Odontoprev SA |
| Magazine Luiza vs. WEG SA | Magazine Luiza vs. Vale SA | Magazine Luiza vs. Itasa Investimentos | Magazine Luiza vs. Ita Unibanco Holding |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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