Correlation Between Rede DOr and Companhia Brasileira

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

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

Diversification Opportunities for Rede DOr and Companhia Brasileira

0.47

Correlation Coefficient

Rede DOr  Companhia Brasileira

Very weak diversification

The 3 months correlation between Rede and Companhia is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Rede DOr So and Companhia Brasileira de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Brasileira and Rede DOr 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 Rede DOr So are associated (or correlated) with Companhia Brasileira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Brasileira has no effect on the direction of Rede DOr i.e., Rede DOr and Companhia Brasileira go up and down completely randomly.

Pair Corralation between Rede DOr and Companhia Brasileira

Assuming the 90 days trading horizon Rede DOr So is expected to under-perform the Companhia Brasileira. But the stock apears to be less risky and, when comparing its historical volatility, Rede DOr So is 1.9 times less risky than Companhia Brasileira. The stock trades about -0.23 of its potential returns per unit of risk. The Companhia Brasileira de is currently generating about -0.08 of returns per unit of risk over similar time horizon. 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	Weak
Accuracy	98.41%
Values	Daily Returns

Rede DOr So  vs.  Companhia Brasileira de

Rede DOr So

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rede DOr So 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.

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.

Pair Trading with Rede DOr and Companhia Brasileira

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

The idea behind Rede DOr So and Companhia Brasileira de 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.