Correlation Between Grendene and Raia Drogasil
Can any of the company-specific risk be diversified away by investing in both Grendene and Raia Drogasil 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 Raia Drogasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grendene SA and Raia Drogasil SA, you can compare the effects of market volatilities on Grendene and Raia Drogasil 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 Raia Drogasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grendene and Raia Drogasil.
Diversification Opportunities for Grendene and Raia Drogasil
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Grendene and Raia is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Grendene SA and Raia Drogasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raia Drogasil 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 Raia Drogasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raia Drogasil SA has no effect on the direction of Grendene i.e., Grendene and Raia Drogasil go up and down completely randomly.
Pair Corralation between Grendene and Raia Drogasil
Assuming the 90 days trading horizon Grendene SA is expected to generate 1.4 times more return on investment than Raia Drogasil. However, Grendene is 1.4 times more volatile than Raia Drogasil SA. It trades about 0.02 of its potential returns per unit of risk. Raia Drogasil SA is currently generating about 0.03 per unit of risk. If you would invest 464.00 in Grendene SA on September 3, 2024 and sell it today you would earn a total of 54.00 from holding Grendene SA or generate 11.64% 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. Raia Drogasil SA
Performance |
| Timeline |
| Grendene SA |
| Raia Drogasil SA |
Grendene and Raia Drogasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grendene and Raia Drogasil
The main advantage of trading using opposite Grendene and Raia Drogasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grendene position performs unexpectedly, Raia Drogasil 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 Raia Drogasil will offset losses from the drop in Raia Drogasil's long position.| Grendene vs. M Dias Branco | Grendene vs. Fleury SA | Grendene vs. Engie Brasil Energia | Grendene vs. Odontoprev SA |
| Raia Drogasil vs. JBS SA | Raia Drogasil vs. Marfrig Global Foods | Raia Drogasil vs. Ambev SA | Raia Drogasil 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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