Correlation Between Rumo SA and Oi SA
Can any of the company-specific risk be diversified away by investing in both Rumo SA and Oi SA 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 Rumo SA and Oi SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rumo SA and Oi SA, you can compare the effects of market volatilities on Rumo SA and Oi SA 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 Rumo SA with a short position of Oi SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rumo SA and Oi SA.
Diversification Opportunities for Rumo SA and Oi SA
Very weak diversification
The 3 months correlation between Rumo and OIBR4 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Rumo SA and Oi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oi SA and Rumo SA 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 Rumo SA are associated (or correlated) with Oi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oi SA has no effect on the direction of Rumo SA i.e., Rumo SA and Oi SA go up and down completely randomly.
Pair Corralation between Rumo SA and Oi SA
Assuming the 90 days trading horizon Rumo SA is expected to generate 0.27 times more return on investment than Oi SA. However, Rumo SA is 3.76 times less risky than Oi SA. It trades about -0.01 of its potential returns per unit of risk. Oi SA is currently generating about -0.08 per unit of risk. If you would invest 1,972 in Rumo SA on September 12, 2024 and sell it today you would lose (14.00) from holding Rumo SA or give up 0.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rumo SA vs. Oi SA
Performance |
| Timeline |
| Rumo SA |
| Oi SA |
Rumo SA and Oi SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rumo SA and Oi SA
The main advantage of trading using opposite Rumo SA and Oi SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rumo SA position performs unexpectedly, Oi SA 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 Oi SA will offset losses from the drop in Oi SA's long position.The idea behind Rumo SA and Oi SA 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.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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