Correlation Between Rede DOr and Grupo SBF

Can any of the company-specific risk be diversified away by investing in both Rede DOr and Grupo SBF 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 Grupo SBF 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 Grupo SBF SA, you can compare the effects of market volatilities on Rede DOr and Grupo SBF 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 Grupo SBF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rede DOr and Grupo SBF.

Diversification Opportunities for Rede DOr and Grupo SBF

0.92

Correlation Coefficient

Rede DOr  Grupo SBF

Almost no diversification

The 3 months correlation between Rede and Grupo is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Rede DOr So and Grupo SBF SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo SBF SA 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 Grupo SBF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo SBF SA has no effect on the direction of Rede DOr i.e., Rede DOr and Grupo SBF go up and down completely randomly.

Pair Corralation between Rede DOr and Grupo SBF

Assuming the 90 days trading horizon Rede DOr So is expected to generate 0.54 times more return on investment than Grupo SBF. However, Rede DOr So is 1.86 times less risky than Grupo SBF. It trades about -0.24 of its potential returns per unit of risk. Grupo SBF SA is currently generating about -0.24 per unit of risk. If you would invest  3,441  in Rede DOr So on September 18, 2024 and sell it today you would lose (773.00) from holding Rede DOr So or give up 22.46% of portfolio value over 90 days.

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

Rede DOr So  vs.  Grupo SBF SA

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.

Grupo SBF SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo SBF 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 Rede DOr and Grupo SBF

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

The idea behind Rede DOr So and Grupo SBF 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.