Correlation Between Natura Co and Magazine Luiza
Can any of the company-specific risk be diversified away by investing in both Natura Co and Magazine Luiza 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 Natura Co and Magazine Luiza into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natura Co Holding and Magazine Luiza SA, you can compare the effects of market volatilities on Natura Co and Magazine Luiza 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 Natura Co with a short position of Magazine Luiza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natura Co and Magazine Luiza.
Diversification Opportunities for Natura Co and Magazine Luiza
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Natura and Magazine is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Natura Co Holding and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza SA and Natura Co 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 Natura Co Holding are associated (or correlated) with Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of Natura Co i.e., Natura Co and Magazine Luiza go up and down completely randomly.
Pair Corralation between Natura Co and Magazine Luiza
Assuming the 90 days trading horizon Natura Co Holding is expected to generate 0.57 times more return on investment than Magazine Luiza. However, Natura Co Holding is 1.75 times less risky than Magazine Luiza. It trades about 0.01 of its potential returns per unit of risk. Magazine Luiza SA is currently generating about -0.07 per unit of risk. If you would invest 1,416 in Natura Co Holding on August 27, 2024 and sell it today you would earn a total of 9.00 from holding Natura Co Holding or generate 0.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Natura Co Holding vs. Magazine Luiza SA
Performance |
| Timeline |
| Natura Co Holding |
| Magazine Luiza SA |
Natura Co and Magazine Luiza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natura Co and Magazine Luiza
The main advantage of trading using opposite Natura Co and Magazine Luiza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natura Co position performs unexpectedly, Magazine Luiza 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 Magazine Luiza will offset losses from the drop in Magazine Luiza's long position.| Natura Co vs. The Procter Gamble | Natura Co vs. Unilever PLC | Natura Co vs. Colgate Palmolive | Natura Co vs. Bombril SA |
| Magazine Luiza vs. Baidu Inc | Magazine Luiza vs. Deutsche Bank Aktiengesellschaft | Magazine Luiza vs. HSBC Holdings plc | Magazine Luiza vs. The Bank of |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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