Correlation Between BTG Pactual and GAEC Educacao

Can any of the company-specific risk be diversified away by investing in both BTG Pactual and GAEC Educacao 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 BTG Pactual and GAEC Educacao into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BTG Pactual Logstica and GAEC Educacao SA, you can compare the effects of market volatilities on BTG Pactual and GAEC Educacao 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 BTG Pactual with a short position of GAEC Educacao. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTG Pactual and GAEC Educacao.

Diversification Opportunities for BTG Pactual and GAEC Educacao

0.79

Correlation Coefficient

BTG Pactual  GAEC Educacao

Poor diversification

The 3 months correlation between BTG and GAEC is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding BTG Pactual Logstica and GAEC Educacao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAEC Educacao SA and BTG Pactual 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 BTG Pactual Logstica are associated (or correlated) with GAEC Educacao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAEC Educacao SA has no effect on the direction of BTG Pactual i.e., BTG Pactual and GAEC Educacao go up and down completely randomly.

Pair Corralation between BTG Pactual and GAEC Educacao

Assuming the 90 days trading horizon BTG Pactual Logstica is expected to generate 0.25 times more return on investment than GAEC Educacao. However, BTG Pactual Logstica is 3.93 times less risky than GAEC Educacao. It trades about -0.04 of its potential returns per unit of risk. GAEC Educacao SA is currently generating about -0.07 per unit of risk. If you would invest  9,975  in BTG Pactual Logstica on September 26, 2024 and sell it today you would lose (575.00) from holding BTG Pactual Logstica or give up 5.76% of portfolio value over 90 days.

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

BTG Pactual Logstica  vs.  GAEC Educacao SA

BTG Pactual Logstica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BTG Pactual Logstica has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong essential indicators, BTG Pactual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GAEC Educacao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAEC Educacao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BTG Pactual and GAEC Educacao

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

The idea behind BTG Pactual Logstica and GAEC Educacao 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.