Correlation Between Magazine Luiza and Natura Co
Can any of the company-specific risk be diversified away by investing in both Magazine Luiza and Natura Co 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 Natura Co 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 Natura Co Holding, you can compare the effects of market volatilities on Magazine Luiza and Natura Co 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 Natura Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magazine Luiza and Natura Co.
Diversification Opportunities for Magazine Luiza and Natura Co
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Magazine and Natura is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza SA and Natura Co Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura Co Holding 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 Natura Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura Co Holding has no effect on the direction of Magazine Luiza i.e., Magazine Luiza and Natura Co go up and down completely randomly.
Pair Corralation between Magazine Luiza and Natura Co
Assuming the 90 days trading horizon Magazine Luiza SA is expected to generate 14.42 times more return on investment than Natura Co. However, Magazine Luiza is 14.42 times more volatile than Natura Co Holding. It trades about 0.04 of its potential returns per unit of risk. Natura Co Holding is currently generating about 0.03 per unit of risk. If you would invest 3,120 in Magazine Luiza SA on August 27, 2024 and sell it today you would lose (2,178) from holding Magazine Luiza SA or give up 69.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.0% |
| Values | Daily Returns |
Magazine Luiza SA vs. Natura Co Holding
Performance |
| Timeline |
| Magazine Luiza SA |
| Natura Co Holding |
Magazine Luiza and Natura Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magazine Luiza and Natura Co
The main advantage of trading using opposite Magazine Luiza and Natura Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magazine Luiza position performs unexpectedly, Natura Co 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 Natura Co will offset losses from the drop in Natura Co's long position.| Magazine Luiza vs. Baidu Inc | Magazine Luiza vs. Deutsche Bank Aktiengesellschaft | Magazine Luiza vs. HSBC Holdings plc | Magazine Luiza vs. The Bank of |
| Natura Co vs. The Procter Gamble | Natura Co vs. Unilever PLC | Natura Co vs. Colgate Palmolive | Natura Co vs. Bombril 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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