Correlation Between Livetech and Santos Brasil
Can any of the company-specific risk be diversified away by investing in both Livetech and Santos Brasil 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 Livetech and Santos Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Livetech da Bahia and Santos Brasil Participaes, you can compare the effects of market volatilities on Livetech and Santos Brasil 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 Livetech with a short position of Santos Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Livetech and Santos Brasil.
Diversification Opportunities for Livetech and Santos Brasil
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Livetech and Santos is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Livetech da Bahia and Santos Brasil Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos Brasil Participaes and Livetech 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 Livetech da Bahia are associated (or correlated) with Santos Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos Brasil Participaes has no effect on the direction of Livetech i.e., Livetech and Santos Brasil go up and down completely randomly.
Pair Corralation between Livetech and Santos Brasil
Assuming the 90 days trading horizon Livetech da Bahia is expected to under-perform the Santos Brasil. In addition to that, Livetech is 1.08 times more volatile than Santos Brasil Participaes. It trades about -0.05 of its total potential returns per unit of risk. Santos Brasil Participaes is currently generating about 0.04 per unit of volatility. If you would invest 1,161 in Santos Brasil Participaes on September 3, 2024 and sell it today you would earn a total of 121.00 from holding Santos Brasil Participaes or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Livetech da Bahia vs. Santos Brasil Participaes
Performance |
| Timeline |
| Livetech da Bahia |
| Santos Brasil Participaes |
Livetech and Santos Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Livetech and Santos Brasil
The main advantage of trading using opposite Livetech and Santos Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Livetech position performs unexpectedly, Santos Brasil 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 Santos Brasil will offset losses from the drop in Santos Brasil's long position.The idea behind Livetech da Bahia and Santos Brasil Participaes pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Santos Brasil vs. Metalurgica Gerdau SA | Santos Brasil vs. Healthpeak Properties | Santos Brasil vs. Micron Technology | Santos Brasil vs. Align Technology |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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