Correlation Between Magazine Luiza and Banco Da
Can any of the company-specific risk be diversified away by investing in both Magazine Luiza and Banco Da 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 Magazine Luiza and Banco Da into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magazine Luiza SA and Banco da Amaznia, you can compare the effects of market volatilities on Magazine Luiza and Banco Da 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 Magazine Luiza with a short position of Banco Da. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magazine Luiza and Banco Da.
Diversification Opportunities for Magazine Luiza and Banco Da
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Magazine and Banco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza SA and Banco da Amaznia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco da Amaznia and Magazine Luiza 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 Magazine Luiza SA are associated (or correlated) with Banco Da. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco da Amaznia has no effect on the direction of Magazine Luiza i.e., Magazine Luiza and Banco Da go up and down completely randomly.
Pair Corralation between Magazine Luiza and Banco Da
Assuming the 90 days trading horizon Magazine Luiza SA is expected to generate 4.31 times more return on investment than Banco Da. However, Magazine Luiza is 4.31 times more volatile than Banco da Amaznia. It trades about -0.06 of its potential returns per unit of risk. Banco da Amaznia is currently generating about -0.46 per unit of risk. If you would invest 978.00 in Magazine Luiza SA on September 4, 2024 and sell it today you would lose (58.00) from holding Magazine Luiza SA or give up 5.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magazine Luiza SA vs. Banco da Amaznia
Performance |
| Timeline |
| Magazine Luiza SA |
| Banco da Amaznia |
Magazine Luiza and Banco Da Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magazine Luiza and Banco Da
The main advantage of trading using opposite Magazine Luiza and Banco Da positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magazine Luiza position performs unexpectedly, Banco Da 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 Banco Da will offset losses from the drop in Banco Da's long position.| Magazine Luiza vs. Tupy SA | Magazine Luiza vs. Engie Brasil Energia | Magazine Luiza vs. Grendene SA | Magazine Luiza vs. M Dias Branco |
| Banco Da vs. WEG SA | Banco Da vs. Engie Brasil Energia | Banco Da vs. Vale SA | Banco Da vs. Magazine Luiza SA |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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