Correlation Between Basic Materials and Light SA
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Light 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 Basic Materials and Light SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Light SA, you can compare the effects of market volatilities on Basic Materials and Light 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 Basic Materials with a short position of Light SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Light SA.
Diversification Opportunities for Basic Materials and Light SA
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Basic and Light is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Light SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light SA and Basic Materials 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 Basic Materials are associated (or correlated) with Light SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light SA has no effect on the direction of Basic Materials i.e., Basic Materials and Light SA go up and down completely randomly.
Pair Corralation between Basic Materials and Light SA
Assuming the 90 days trading horizon Basic Materials is expected to generate 22.97 times less return on investment than Light SA. But when comparing it to its historical volatility, Basic Materials is 3.73 times less risky than Light SA. It trades about 0.0 of its potential returns per unit of risk. Light SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 487.00 in Light SA on September 2, 2024 and sell it today you would lose (53.00) from holding Light SA or give up 10.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.0% |
| Values | Daily Returns |
Basic Materials vs. Light SA
Performance |
| Timeline |
Basic Materials and Light SA Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Light SA
Pair trading matchups for Light SA
Pair Trading with Basic Materials and Light SA
The main advantage of trading using opposite Basic Materials and Light SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Light 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 Light SA will offset losses from the drop in Light SA's long position.| Basic Materials vs. Uber Technologies | Basic Materials vs. Palantir Technologies | Basic Materials vs. Marvell Technology | Basic Materials vs. Align Technology |
| Light SA vs. CPFL Energia SA | Light SA vs. Companhia Energtica de | Light SA vs. Centrais Eltricas Brasileiras | Light SA vs. Companhia de Saneamento |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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