Correlation Between Companhia Tecidos and Bombril SA

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Can any of the company-specific risk be diversified away by investing in both Companhia Tecidos and Bombril 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 Tecidos and Bombril SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia Tecidos Santanense and Bombril SA, you can compare the effects of market volatilities on Companhia Tecidos and Bombril 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 Tecidos with a short position of Bombril SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Tecidos and Bombril SA.

Diversification Opportunities for Companhia Tecidos and Bombril SA

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Companhia and Bombril is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Tecidos Santanense and Bombril SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombril SA and Companhia Tecidos 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 Tecidos Santanense are associated (or correlated) with Bombril SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombril SA has no effect on the direction of Companhia Tecidos i.e., Companhia Tecidos and Bombril SA go up and down completely randomly.

Pair Corralation between Companhia Tecidos and Bombril SA

Assuming the 90 days trading horizon Companhia Tecidos Santanense is expected to under-perform the Bombril SA. But the stock apears to be less risky and, when comparing its historical volatility, Companhia Tecidos Santanense is 1.15 times less risky than Bombril SA. The stock trades about -0.33 of its potential returns per unit of risk. The Bombril SA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  222.00  in Bombril SA on September 23, 2024 and sell it today you would lose (23.00) from holding Bombril SA or give up 10.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Companhia Tecidos Santanense  vs.  Bombril SA

 Performance 
       Timeline  
Companhia Tecidos 

Risk-Adjusted Performance

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Strong
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Over the last 90 days Companhia Tecidos Santanense has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Bombril SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bombril SA 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.

Companhia Tecidos and Bombril SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Companhia Tecidos and Bombril SA

The main advantage of trading using opposite Companhia Tecidos and Bombril SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Tecidos position performs unexpectedly, Bombril 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 Bombril SA will offset losses from the drop in Bombril SA's long position.
The idea behind Companhia Tecidos Santanense and Bombril 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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