Correlation Between NAVI CRDITO and HEDGE Brasil

Can any of the company-specific risk be diversified away by investing in both NAVI CRDITO and HEDGE Brasil 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 NAVI CRDITO and HEDGE Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NAVI CRDITO IMOBILIRIO and HEDGE Brasil Shopping, you can compare the effects of market volatilities on NAVI CRDITO and HEDGE Brasil 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 NAVI CRDITO with a short position of HEDGE Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAVI CRDITO and HEDGE Brasil.

Diversification Opportunities for NAVI CRDITO and HEDGE Brasil

0.03

Correlation Coefficient

NAVI CRDITO  HEDGE Brasil

Significant diversification

The 3 months correlation between NAVI and HEDGE is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding NAVI CRDITO IMOBILIRIO and HEDGE Brasil Shopping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEDGE Brasil Shopping and NAVI CRDITO 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 NAVI CRDITO IMOBILIRIO are associated (or correlated) with HEDGE Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEDGE Brasil Shopping has no effect on the direction of NAVI CRDITO i.e., NAVI CRDITO and HEDGE Brasil go up and down completely randomly.

Pair Corralation between NAVI CRDITO and HEDGE Brasil

Assuming the 90 days trading horizon NAVI CRDITO IMOBILIRIO is expected to generate 3.44 times more return on investment than HEDGE Brasil. However, NAVI CRDITO is 3.44 times more volatile than HEDGE Brasil Shopping. It trades about -0.02 of its potential returns per unit of risk. HEDGE Brasil Shopping is currently generating about -0.2 per unit of risk. If you would invest  880.00  in NAVI CRDITO IMOBILIRIO on September 3, 2024 and sell it today you would lose (40.00) from holding NAVI CRDITO IMOBILIRIO or give up 4.55% of portfolio value over 90 days.

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

NAVI CRDITO IMOBILIRIO  vs.  HEDGE Brasil Shopping

NAVI CRDITO IMOBILIRIO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NAVI CRDITO IMOBILIRIO has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, NAVI CRDITO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HEDGE Brasil Shopping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEDGE Brasil Shopping has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with NAVI CRDITO and HEDGE Brasil

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

The idea behind NAVI CRDITO IMOBILIRIO and HEDGE Brasil Shopping 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.