Correlation Between Companhia Siderrgica and Bradespar

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

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

Diversification Opportunities for Companhia Siderrgica and Bradespar

0.64

Correlation Coefficient

Companhia Siderrgica  Bradespar

Poor diversification

The 3 months correlation between Companhia and Bradespar is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderrgica Nacional and Bradespar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bradespar SA and Companhia Siderrgica 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 Siderrgica Nacional are associated (or correlated) with Bradespar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bradespar SA has no effect on the direction of Companhia Siderrgica i.e., Companhia Siderrgica and Bradespar go up and down completely randomly.

Pair Corralation between Companhia Siderrgica and Bradespar

Assuming the 90 days trading horizon Companhia Siderrgica Nacional is expected to generate 1.66 times more return on investment than Bradespar. However, Companhia Siderrgica is 1.66 times more volatile than Bradespar SA. It trades about 0.03 of its potential returns per unit of risk. Bradespar SA is currently generating about 0.05 per unit of risk. If you would invest  1,079  in Companhia Siderrgica Nacional on September 3, 2024 and sell it today you would earn a total of  37.00  from holding Companhia Siderrgica Nacional or generate 3.43% return on investment over 90 days.

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

Companhia Siderrgica Nacional  vs.  Bradespar SA

Companhia Siderrgica

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Siderrgica Nacional are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Companhia Siderrgica is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bradespar SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bradespar SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bradespar is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Companhia Siderrgica and Bradespar

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

The idea behind Companhia Siderrgica Nacional and Bradespar 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.