Correlation Between Companhia and Magazine Luiza
Can any of the company-specific risk be diversified away by investing in both Companhia 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 Companhia and Magazine Luiza into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia de Saneamento and Magazine Luiza SA, you can compare the effects of market volatilities on Companhia 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 Companhia with a short position of Magazine Luiza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Magazine Luiza.
Diversification Opportunities for Companhia and Magazine Luiza
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Companhia and Magazine is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento 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 Companhia 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 Companhia de Saneamento 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 Companhia i.e., Companhia and Magazine Luiza go up and down completely randomly.
Pair Corralation between Companhia and Magazine Luiza
Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 0.43 times more return on investment than Magazine Luiza. However, Companhia de Saneamento is 2.3 times less risky than Magazine Luiza. It trades about 0.22 of its potential returns per unit of risk. Magazine Luiza SA is currently generating about 0.02 per unit of risk. If you would invest 9,014 in Companhia de Saneamento on August 24, 2024 and sell it today you would earn a total of 666.00 from holding Companhia de Saneamento or generate 7.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Saneamento vs. Magazine Luiza SA
Performance |
| Timeline |
| Companhia de Saneamento |
| Magazine Luiza SA |
Companhia and Magazine Luiza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and Magazine Luiza
The main advantage of trading using opposite Companhia and Magazine Luiza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia 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.| Companhia vs. BB Seguridade Participacoes | Companhia vs. Engie Brasil Energia | Companhia vs. CTEEP Companhia | Companhia vs. Itasa Investimentos |
| 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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