Correlation Between Magazine Luiza and Itasa Investimentos
Can any of the company-specific risk be diversified away by investing in both Magazine Luiza and Itasa Investimentos 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 Itasa Investimentos 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 Itasa Investimentos, you can compare the effects of market volatilities on Magazine Luiza and Itasa Investimentos 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 Itasa Investimentos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magazine Luiza and Itasa Investimentos.
Diversification Opportunities for Magazine Luiza and Itasa Investimentos
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magazine and Itasa is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza SA and Itasa Investimentos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itasa Investimentos 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 Itasa Investimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itasa Investimentos has no effect on the direction of Magazine Luiza i.e., Magazine Luiza and Itasa Investimentos go up and down completely randomly.
Pair Corralation between Magazine Luiza and Itasa Investimentos
Assuming the 90 days trading horizon Magazine Luiza SA is expected to generate 32.07 times more return on investment than Itasa Investimentos. However, Magazine Luiza is 32.07 times more volatile than Itasa Investimentos. It trades about 0.04 of its potential returns per unit of risk. Itasa Investimentos is currently generating about 0.06 per unit of risk. If you would invest 2,800 in Magazine Luiza SA on September 2, 2024 and sell it today you would lose (1,897) from holding Magazine Luiza SA or give up 67.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Magazine Luiza SA vs. Itasa Investimentos
Performance |
| Timeline |
| Magazine Luiza SA |
| Itasa Investimentos |
Magazine Luiza and Itasa Investimentos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magazine Luiza and Itasa Investimentos
The main advantage of trading using opposite Magazine Luiza and Itasa Investimentos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magazine Luiza position performs unexpectedly, Itasa Investimentos 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 Itasa Investimentos will offset losses from the drop in Itasa Investimentos' long position.| Magazine Luiza vs. Engie Brasil Energia | Magazine Luiza vs. Fras le SA | Magazine Luiza vs. Energisa SA | Magazine Luiza vs. Clave Indices De |
| Itasa Investimentos vs. Banco do Brasil | Itasa Investimentos vs. Banco Bradesco SA | Itasa Investimentos vs. Ita Unibanco Holding | Itasa Investimentos vs. Petrleo Brasileiro 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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