Correlation Between Direcional Engenharia and Best Buy

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

By analyzing existing cross correlation between Direcional Engenharia SA and Best Buy Co, you can compare the effects of market volatilities on Direcional Engenharia and Best Buy 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 Direcional Engenharia with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direcional Engenharia and Best Buy.

Diversification Opportunities for Direcional Engenharia and Best Buy

0.12

Correlation Coefficient

Direcional Engenharia  Best Buy

Average diversification

The 3 months correlation between Direcional and Best is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Direcional Engenharia SA and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Direcional Engenharia 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 Direcional Engenharia SA are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Direcional Engenharia i.e., Direcional Engenharia and Best Buy go up and down completely randomly.

Pair Corralation between Direcional Engenharia and Best Buy

Assuming the 90 days trading horizon Direcional Engenharia SA is expected to under-perform the Best Buy. In addition to that, Direcional Engenharia is 1.8 times more volatile than Best Buy Co. It trades about -0.09 of its total potential returns per unit of risk. Best Buy Co is currently generating about -0.02 per unit of volatility. If you would invest  53,784  in Best Buy Co on September 25, 2024 and sell it today you would lose (952.00) from holding Best Buy Co or give up 1.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Direcional Engenharia SA  vs.  Best Buy Co

Direcional Engenharia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direcional Engenharia SA 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.

Best Buy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Best Buy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Best Buy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direcional Engenharia and Best Buy

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

The idea behind Direcional Engenharia SA and Best Buy Co 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.