Correlation Between Companhia and Pettenati

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

By analyzing existing cross correlation between Companhia de Tecidos and Pettenati SA Industria, you can compare the effects of market volatilities on Companhia and Pettenati 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 Pettenati. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Pettenati.

Diversification Opportunities for Companhia and Pettenati

0.0

Correlation Coefficient

Companhia  Pettenati

Pay attention - limited upside

The 3 months correlation between Companhia and Pettenati is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Tecidos and Pettenati SA Industria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pettenati SA Industria 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 Tecidos are associated (or correlated) with Pettenati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pettenati SA Industria has no effect on the direction of Companhia i.e., Companhia and Pettenati go up and down completely randomly.

Pair Corralation between Companhia and Pettenati

Assuming the 90 days trading horizon Companhia de Tecidos is expected to generate 4.39 times more return on investment than Pettenati. However, Companhia is 4.39 times more volatile than Pettenati SA Industria. It trades about 0.03 of its potential returns per unit of risk. Pettenati SA Industria is currently generating about 0.01 per unit of risk. If you would invest  471.00  in Companhia de Tecidos on September 23, 2024 and sell it today you would earn a total of  242.00  from holding Companhia de Tecidos or generate 51.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Companhia de Tecidos  vs.  Pettenati SA Industria

Companhia de Tecidos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia de Tecidos 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.

Pettenati SA Industria

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pettenati SA Industria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Companhia and Pettenati

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

The idea behind Companhia de Tecidos and Pettenati SA Industria 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.