Correlation Between M Dias and Guararapes Confeces

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

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

Diversification Opportunities for M Dias and Guararapes Confeces

0.75

Correlation Coefficient

M Dias  Guararapes Confeces

Poor diversification

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

Pair Corralation between M Dias and Guararapes Confeces

Assuming the 90 days trading horizon M Dias Branco is expected to generate 0.58 times more return on investment than Guararapes Confeces. However, M Dias Branco is 1.73 times less risky than Guararapes Confeces. It trades about -0.11 of its potential returns per unit of risk. Guararapes Confeces SA is currently generating about -0.07 per unit of risk. 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

M Dias Branco  vs.  Guararapes Confeces SA

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.

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.

Pair Trading with M Dias and Guararapes Confeces

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

The idea behind M Dias Branco and Guararapes Confeces 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.