Correlation Between WEG SA and Hapvida Participaes
Can any of the company-specific risk be diversified away by investing in both WEG SA and Hapvida Participaes 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 WEG SA and Hapvida Participaes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEG SA and Hapvida Participaes e, you can compare the effects of market volatilities on WEG SA and Hapvida Participaes 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 WEG SA with a short position of Hapvida Participaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEG SA and Hapvida Participaes.
Diversification Opportunities for WEG SA and Hapvida Participaes
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WEG and Hapvida is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding WEG SA and Hapvida Participaes e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hapvida Participaes and WEG 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 WEG SA are associated (or correlated) with Hapvida Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hapvida Participaes has no effect on the direction of WEG SA i.e., WEG SA and Hapvida Participaes go up and down completely randomly.
Pair Corralation between WEG SA and Hapvida Participaes
Assuming the 90 days trading horizon WEG SA is expected to generate 0.67 times more return on investment than Hapvida Participaes. However, WEG SA is 1.49 times less risky than Hapvida Participaes. It trades about 0.15 of its potential returns per unit of risk. Hapvida Participaes e is currently generating about -0.04 per unit of risk. If you would invest 3,182 in WEG SA on August 28, 2024 and sell it today you would earn a total of 2,033 from holding WEG SA or generate 63.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.52% |
| Values | Daily Returns |
WEG SA vs. Hapvida Participaes e
Performance |
| Timeline |
| WEG SA |
| Hapvida Participaes |
WEG SA and Hapvida Participaes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEG SA and Hapvida Participaes
The main advantage of trading using opposite WEG SA and Hapvida Participaes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEG SA position performs unexpectedly, Hapvida Participaes 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 Hapvida Participaes will offset losses from the drop in Hapvida Participaes' long position.The idea behind WEG SA and Hapvida Participaes e 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.| Hapvida Participaes vs. Engie Brasil Energia | Hapvida Participaes vs. WEG SA | Hapvida Participaes vs. Ambev SA | Hapvida Participaes vs. M Dias Branco |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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