Correlation Between Alfa Holdings and CVC Brasil

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

By analyzing existing cross correlation between Alfa Holdings SA and CVC Brasil Operadora, you can compare the effects of market volatilities on Alfa Holdings and CVC 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 Alfa Holdings with a short position of CVC Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Holdings and CVC Brasil.

Diversification Opportunities for Alfa Holdings and CVC Brasil

-0.68

Correlation Coefficient

Alfa Holdings  CVC Brasil

Excellent diversification

The 3 months correlation between Alfa and CVC is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Holdings SA and CVC Brasil Operadora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Brasil Operadora and Alfa Holdings 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 Alfa Holdings SA are associated (or correlated) with CVC Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Brasil Operadora has no effect on the direction of Alfa Holdings i.e., Alfa Holdings and CVC Brasil go up and down completely randomly.

Pair Corralation between Alfa Holdings and CVC Brasil

Assuming the 90 days trading horizon Alfa Holdings SA is expected to under-perform the CVC Brasil. But the preferred stock apears to be less risky and, when comparing its historical volatility, Alfa Holdings SA is 1.33 times less risky than CVC Brasil. The preferred stock trades about -0.19 of its potential returns per unit of risk. The CVC Brasil Operadora is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  204.00  in CVC Brasil Operadora on September 14, 2024 and sell it today you would earn a total of  2.00  from holding CVC Brasil Operadora or generate 0.98% return on investment over 90 days.

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

Alfa Holdings SA  vs.  CVC Brasil Operadora

Alfa Holdings SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Holdings 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 Preferred 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.

CVC Brasil Operadora

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVC Brasil Operadora are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CVC Brasil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alfa Holdings and CVC Brasil

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

The idea behind Alfa Holdings SA and CVC Brasil Operadora 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.