Correlation Between Companhia Brasileira and Pet Center

Can any of the company-specific risk be diversified away by investing in both Companhia Brasileira and Pet Center 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 Pet Center 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 Pet Center Comrcio, you can compare the effects of market volatilities on Companhia Brasileira and Pet Center 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 Pet Center. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Brasileira and Pet Center.

Diversification Opportunities for Companhia Brasileira and Pet Center

0.72

Correlation Coefficient

Companhia Brasileira  Pet Center

Poor diversification

The 3 months correlation between Companhia and Pet is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Brasileira de and Pet Center Comrcio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pet Center Comrcio 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 Pet Center. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pet Center Comrcio has no effect on the direction of Companhia Brasileira i.e., Companhia Brasileira and Pet Center go up and down completely randomly.

Pair Corralation between Companhia Brasileira and Pet Center

Assuming the 90 days trading horizon Companhia Brasileira de is expected to under-perform the Pet Center. But the stock apears to be less risky and, when comparing its historical volatility, Companhia Brasileira de is 1.19 times less risky than Pet Center. The stock trades about -0.11 of its potential returns per unit of risk. The Pet Center Comrcio is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  428.00  in Pet Center Comrcio on September 16, 2024 and sell it today you would lose (38.00) from holding Pet Center Comrcio or give up 8.88% 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.  Pet Center Comrcio

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.

Pet Center Comrcio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pet Center Comrcio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pet Center is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Companhia Brasileira and Pet Center

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

The idea behind Companhia Brasileira de and Pet Center Comrcio 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.