Correlation Between Companhia Brasileira and Hapvida Participaes

Can any of the company-specific risk be diversified away by investing in both Companhia Brasileira and Hapvida Participaes 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 Companhia Brasileira and Hapvida Participaes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Companhia Brasileira de and Hapvida Participaes e, you can compare the effects of market volatilities on Companhia Brasileira and Hapvida Participaes 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 Companhia Brasileira with a short position of Hapvida Participaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Brasileira and Hapvida Participaes.

Diversification Opportunities for Companhia Brasileira and Hapvida Participaes

0.62

Correlation Coefficient

Companhia Brasileira  Hapvida Participaes

Poor diversification

The 3 months correlation between Companhia and Hapvida is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Brasileira de and Hapvida Participaes e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hapvida Participaes and Companhia Brasileira 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 Companhia Brasileira de are associated (or correlated) with Hapvida Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hapvida Participaes has no effect on the direction of Companhia Brasileira i.e., Companhia Brasileira and Hapvida Participaes go up and down completely randomly.

Pair Corralation between Companhia Brasileira and Hapvida Participaes

Assuming the 90 days trading horizon Companhia Brasileira de is expected to generate 1.07 times more return on investment than Hapvida Participaes. However, Companhia Brasileira is 1.07 times more volatile than Hapvida Participaes e. It trades about -0.08 of its potential returns per unit of risk. Hapvida Participaes e is currently generating about -0.3 per unit of risk. If you would invest  304.00  in Companhia Brasileira de on September 13, 2024 and sell it today you would lose (50.00) from holding Companhia Brasileira de or give up 16.45% of portfolio value over 90 days.

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

Companhia Brasileira de  vs.  Hapvida Participaes e

Companhia Brasileira

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Brasileira de 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.

Hapvida Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hapvida Participaes e 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 Companhia Brasileira and Hapvida Participaes

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

The idea behind Companhia Brasileira de and Hapvida Participaes e 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.