Correlation Between Companhia and Grazziotin

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

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

Diversification Opportunities for Companhia and Grazziotin

0.21

Correlation Coefficient

Companhia  Grazziotin

Modest diversification

The 3 months correlation between Companhia and Grazziotin is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Gs and Grazziotin SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grazziotin SA and 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 Companhia de Gs are associated (or correlated) with Grazziotin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grazziotin SA has no effect on the direction of Companhia i.e., Companhia and Grazziotin go up and down completely randomly.

Pair Corralation between Companhia and Grazziotin

Assuming the 90 days trading horizon Companhia de Gs is expected to generate 1.55 times more return on investment than Grazziotin. However, Companhia is 1.55 times more volatile than Grazziotin SA. It trades about 0.03 of its potential returns per unit of risk. Grazziotin SA is currently generating about 0.03 per unit of risk. If you would invest  10,904  in Companhia de Gs on September 26, 2024 and sell it today you would earn a total of  1,296  from holding Companhia de Gs or generate 11.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.04%
Values	Daily Returns

Companhia de Gs  vs.  Grazziotin SA

Companhia de Gs

Risk-Adjusted Performance

0 of 100

Very Weak

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

Grazziotin SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grazziotin SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grazziotin may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Companhia and Grazziotin

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

The idea behind Companhia de Gs and Grazziotin 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.