Correlation Between BrasilAgro Companhia and Kepler Weber

Can any of the company-specific risk be diversified away by investing in both BrasilAgro Companhia and Kepler Weber 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 BrasilAgro Companhia and Kepler Weber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BrasilAgro Companhia and Kepler Weber SA, you can compare the effects of market volatilities on BrasilAgro Companhia and Kepler Weber 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 BrasilAgro Companhia with a short position of Kepler Weber. Check out your portfolio center. Please also check ongoing floating volatility patterns of BrasilAgro Companhia and Kepler Weber.

Diversification Opportunities for BrasilAgro Companhia and Kepler Weber

0.75

Correlation Coefficient

BrasilAgro Companhia  Kepler Weber

Poor diversification

The 3 months correlation between BrasilAgro and Kepler is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BrasilAgro Companhia and Kepler Weber SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kepler Weber SA and BrasilAgro 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 BrasilAgro Companhia are associated (or correlated) with Kepler Weber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kepler Weber SA has no effect on the direction of BrasilAgro Companhia i.e., BrasilAgro Companhia and Kepler Weber go up and down completely randomly.

Pair Corralation between BrasilAgro Companhia and Kepler Weber

Assuming the 90 days trading horizon BrasilAgro Companhia is expected to generate 0.91 times more return on investment than Kepler Weber. However, BrasilAgro Companhia is 1.1 times less risky than Kepler Weber. It trades about -0.05 of its potential returns per unit of risk. Kepler Weber SA is currently generating about -0.09 per unit of risk. If you would invest  2,480  in BrasilAgro Companhia on September 5, 2024 and sell it today you would lose (155.00) from holding BrasilAgro Companhia or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BrasilAgro Companhia  vs.  Kepler Weber SA

BrasilAgro Companhia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BrasilAgro Companhia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BrasilAgro Companhia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Kepler Weber SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kepler Weber SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with BrasilAgro Companhia and Kepler Weber

The main advantage of trading using opposite BrasilAgro Companhia and Kepler Weber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BrasilAgro Companhia position performs unexpectedly, Kepler Weber 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 Kepler Weber will offset losses from the drop in Kepler Weber's long position.

The idea behind BrasilAgro Companhia and Kepler Weber 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.