Correlation Between Cable One and HEDGE Brasil

Can any of the company-specific risk be diversified away by investing in both Cable One and HEDGE Brasil 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 Cable One and HEDGE Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cable One and HEDGE Brasil Shopping, you can compare the effects of market volatilities on Cable One and HEDGE Brasil 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 Cable One with a short position of HEDGE Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cable One and HEDGE Brasil.

Diversification Opportunities for Cable One and HEDGE Brasil

-0.69

Correlation Coefficient

Cable One  HEDGE Brasil

Excellent diversification

The 3 months correlation between Cable and HEDGE is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cable One and HEDGE Brasil Shopping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEDGE Brasil Shopping and Cable One 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 Cable One are associated (or correlated) with HEDGE Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEDGE Brasil Shopping has no effect on the direction of Cable One i.e., Cable One and HEDGE Brasil go up and down completely randomly.

Pair Corralation between Cable One and HEDGE Brasil

Assuming the 90 days trading horizon Cable One is expected to generate 2.16 times more return on investment than HEDGE Brasil. However, Cable One is 2.16 times more volatile than HEDGE Brasil Shopping. It trades about 0.17 of its potential returns per unit of risk. HEDGE Brasil Shopping is currently generating about -0.15 per unit of risk. If you would invest  924.00  in Cable One on September 23, 2024 and sell it today you would earn a total of  231.00  from holding Cable One or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Cable One  vs.  HEDGE Brasil Shopping

Cable One

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cable One sustained solid returns over the last few months and may actually be approaching a breakup point.

HEDGE Brasil Shopping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEDGE Brasil Shopping has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Cable One and HEDGE Brasil

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

The idea behind Cable One and HEDGE Brasil Shopping 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.