Correlation Between CBO Territoria and Aurea SA

Can any of the company-specific risk be diversified away by investing in both CBO Territoria and Aurea SA 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 CBO Territoria and Aurea SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for CBO Territoria and Aurea SA

0.4

Correlation Coefficient

CBO Territoria  Aurea SA

Very weak diversification

The 3 months correlation between CBO and Aurea is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CBO Territoria SA and Aurea SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurea SA and CBO Territoria 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 CBO Territoria SA are associated (or correlated) with Aurea SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurea SA has no effect on the direction of CBO Territoria i.e., CBO Territoria and Aurea SA go up and down completely randomly.

Pair Corralation between CBO Territoria and Aurea SA

Assuming the 90 days trading horizon CBO Territoria SA is expected to generate 0.16 times more return on investment than Aurea SA. However, CBO Territoria SA is 6.36 times less risky than Aurea SA. It trades about 0.0 of its potential returns per unit of risk. Aurea SA is currently generating about -0.58 per unit of risk. If you would invest  358.00  in CBO Territoria SA on September 5, 2024 and sell it today you would earn a total of  0.00  from holding CBO Territoria SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

CBO Territoria SA  vs.  Aurea SA

CBO Territoria SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CBO Territoria SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CBO Territoria is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aurea SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurea SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Aurea SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CBO Territoria and Aurea SA

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

The idea behind CBO Territoria SA and Aurea 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.