Correlation Between Guararapes Confeces and M Dias

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

By analyzing existing cross correlation between Guararapes Confeces SA and M Dias Branco, you can compare the effects of market volatilities on Guararapes Confeces and M Dias 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 Guararapes Confeces with a short position of M Dias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guararapes Confeces and M Dias.

Diversification Opportunities for Guararapes Confeces and M Dias

0.75

Correlation Coefficient

Guararapes Confeces  M Dias

Poor diversification

The 3 months correlation between Guararapes and MDIA3 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Guararapes Confeces SA and M Dias Branco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Dias Branco and Guararapes Confeces 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 Guararapes Confeces SA are associated (or correlated) with M Dias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Dias Branco has no effect on the direction of Guararapes Confeces i.e., Guararapes Confeces and M Dias go up and down completely randomly.

Pair Corralation between Guararapes Confeces and M Dias

Assuming the 90 days trading horizon Guararapes Confeces SA is expected to under-perform the M Dias. In addition to that, Guararapes Confeces is 1.73 times more volatile than M Dias Branco. It trades about -0.07 of its total potential returns per unit of risk. M Dias Branco is currently generating about -0.11 per unit of volatility. If you would invest  2,499  in M Dias Branco on September 26, 2024 and sell it today you would lose (447.00) from holding M Dias Branco or give up 17.89% of portfolio value over 90 days.

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

Guararapes Confeces SA  vs.  M Dias Branco

Guararapes Confeces

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guararapes Confeces 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.

M Dias Branco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days M Dias Branco 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.

Pair Trading with Guararapes Confeces and M Dias

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

The idea behind Guararapes Confeces SA and M Dias Branco 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.