Correlation Between Basic Materials and Renova Energia
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Renova Energia 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 Renova Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Renova Energia SA, you can compare the effects of market volatilities on Basic Materials and Renova Energia 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 Renova Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Renova Energia.
Diversification Opportunities for Basic Materials and Renova Energia
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Basic and Renova is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Renova Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renova Energia 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 Renova Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renova Energia SA has no effect on the direction of Basic Materials i.e., Basic Materials and Renova Energia go up and down completely randomly.
Pair Corralation between Basic Materials and Renova Energia
Assuming the 90 days trading horizon Basic Materials is expected to generate 0.39 times more return on investment than Renova Energia. However, Basic Materials is 2.56 times less risky than Renova Energia. It trades about 0.01 of its potential returns per unit of risk. Renova Energia SA is currently generating about -0.03 per unit of risk. If you would invest 584,654 in Basic Materials on September 5, 2024 and sell it today you would earn a total of 8,496 from holding Basic Materials or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.0% |
| Values | Daily Returns |
Basic Materials vs. Renova Energia SA
Performance |
| Timeline |
Basic Materials and Renova Energia Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Renova Energia SA
Pair trading matchups for Renova Energia
Pair Trading with Basic Materials and Renova Energia
The main advantage of trading using opposite Basic Materials and Renova Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Renova Energia 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 Renova Energia will offset losses from the drop in Renova Energia's long position.| Basic Materials vs. Costco Wholesale | Basic Materials vs. Paycom Software | Basic Materials vs. American Airlines Group | Basic Materials vs. UnitedHealth Group Incorporated |
| Renova Energia vs. CVS Health | Renova Energia vs. Broadcom | Renova Energia vs. Multilaser Industrial SA | Renova Energia vs. Hospital Mater Dei |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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