Correlation Between Companhia and Karsten SA

Can any of the company-specific risk be diversified away by investing in both Companhia and Karsten 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 Companhia and Karsten SA 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 Karsten SA, you can compare the effects of market volatilities on Companhia and Karsten 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 Companhia with a short position of Karsten SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Karsten SA.

Diversification Opportunities for Companhia and Karsten SA

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Correlation Coefficient

Companhia  Karsten SA

Pay attention - limited upside

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

Pair Corralation between Companhia and Karsten SA

Assuming the 90 days trading horizon Companhia de Tecidos is expected to generate 1.14 times more return on investment than Karsten SA. However, Companhia is 1.14 times more volatile than Karsten SA. It trades about 0.09 of its potential returns per unit of risk. Karsten SA is currently generating about 0.07 per unit of risk. If you would invest  68.00  in Companhia de Tecidos on September 23, 2024 and sell it today you would earn a total of  18.00  from holding Companhia de Tecidos or generate 26.47% 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.  Karsten SA

Companhia de Tecidos

Risk-Adjusted Performance

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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.

Karsten SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Karsten SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Karsten SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Companhia and Karsten SA

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

The idea behind Companhia de Tecidos and Karsten 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.