Correlation Between Cemepe Investimentos and Booking Holdings

Can any of the company-specific risk be diversified away by investing in both Cemepe Investimentos and Booking Holdings 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 Cemepe Investimentos and Booking Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cemepe Investimentos SA and Booking Holdings, you can compare the effects of market volatilities on Cemepe Investimentos and Booking Holdings 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 Cemepe Investimentos with a short position of Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cemepe Investimentos and Booking Holdings.

Diversification Opportunities for Cemepe Investimentos and Booking Holdings

0.75

Correlation Coefficient

Cemepe Investimentos  Booking Holdings

Poor diversification

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

Pair Corralation between Cemepe Investimentos and Booking Holdings

Assuming the 90 days trading horizon Cemepe Investimentos is expected to generate 5.6 times less return on investment than Booking Holdings. In addition to that, Cemepe Investimentos is 1.02 times more volatile than Booking Holdings. It trades about 0.04 of its total potential returns per unit of risk. Booking Holdings is currently generating about 0.24 per unit of volatility. If you would invest  12,973  in Booking Holdings on September 23, 2024 and sell it today you would earn a total of  4,156  from holding Booking Holdings or generate 32.04% return on investment over 90 days.

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

Cemepe Investimentos SA  vs.  Booking Holdings

Cemepe Investimentos

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cemepe Investimentos SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cemepe Investimentos is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Booking Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Booking Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cemepe Investimentos and Booking Holdings

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

The idea behind Cemepe Investimentos SA and Booking Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.