Correlation Between Rede DOr and Fras Le
Can any of the company-specific risk be diversified away by investing in both Rede DOr and Fras Le 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 Rede DOr and Fras Le into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rede DOr So and Fras le SA, you can compare the effects of market volatilities on Rede DOr and Fras Le 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 Rede DOr with a short position of Fras Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rede DOr and Fras Le.
Diversification Opportunities for Rede DOr and Fras Le
Excellent diversification
The 3 months correlation between Rede and Fras is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Rede DOr So and Fras le SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fras le SA and Rede DOr 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 Rede DOr So are associated (or correlated) with Fras Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fras le SA has no effect on the direction of Rede DOr i.e., Rede DOr and Fras Le go up and down completely randomly.
Pair Corralation between Rede DOr and Fras Le
Assuming the 90 days trading horizon Rede DOr So is expected to generate 0.88 times more return on investment than Fras Le. However, Rede DOr So is 1.13 times less risky than Fras Le. It trades about -0.04 of its potential returns per unit of risk. Fras le SA is currently generating about -0.15 per unit of risk. If you would invest 2,996 in Rede DOr So on August 28, 2024 and sell it today you would lose (44.00) from holding Rede DOr So or give up 1.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rede DOr So vs. Fras le SA
Performance |
| Timeline |
| Rede DOr So |
| Fras le SA |
Rede DOr and Fras Le Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rede DOr and Fras Le
The main advantage of trading using opposite Rede DOr and Fras Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rede DOr position performs unexpectedly, Fras Le 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 Fras Le will offset losses from the drop in Fras Le's long position.| Rede DOr vs. Fras le SA | Rede DOr vs. Western Digital | Rede DOr vs. Clave Indices De | Rede DOr vs. BTG Pactual Logstica |
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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