Correlation Between Basic Materials and Guardian Logistica

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

By analyzing existing cross correlation between Basic Materials and Guardian Logistica Fundo, you can compare the effects of market volatilities on Basic Materials and Guardian Logistica 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 Basic Materials with a short position of Guardian Logistica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Guardian Logistica.

Diversification Opportunities for Basic Materials and Guardian Logistica

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Correlation Coefficient

Basic Materials  Guardian Logistica

Pay attention - limited upside

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

Pair Corralation between Basic Materials and Guardian Logistica

If you would invest  559,406  in Basic Materials on September 25, 2024 and sell it today you would lose (2,312) from holding Basic Materials or give up 0.41% of portfolio value over 90 days.

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

Basic Materials  vs.  Guardian Logistica Fundo

Pair Trading with Basic Materials and Guardian Logistica

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

The idea behind Basic Materials and Guardian Logistica Fundo 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..