Correlation Between Grupo SBF and GPS Participaes

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

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

Diversification Opportunities for Grupo SBF and GPS Participaes

0.69

Correlation Coefficient

Grupo SBF  GPS Participaes

Poor diversification

The 3 months correlation between Grupo and GPS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Grupo SBF SA and GPS Participaes e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPS Participaes e and Grupo SBF 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 Grupo SBF SA are associated (or correlated) with GPS Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPS Participaes e has no effect on the direction of Grupo SBF i.e., Grupo SBF and GPS Participaes go up and down completely randomly.

Pair Corralation between Grupo SBF and GPS Participaes

Assuming the 90 days trading horizon Grupo SBF SA is expected to under-perform the GPS Participaes. In addition to that, Grupo SBF is 1.17 times more volatile than GPS Participaes e. It trades about -0.37 of its total potential returns per unit of risk. GPS Participaes e is currently generating about -0.13 per unit of volatility. If you would invest  1,700  in GPS Participaes e on September 5, 2024 and sell it today you would lose (96.00) from holding GPS Participaes e or give up 5.65% of portfolio value over 90 days.

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

Grupo SBF SA  vs.  GPS Participaes e

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.

GPS Participaes e

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPS Participaes e has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Grupo SBF and GPS Participaes

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

The idea behind Grupo SBF SA and GPS 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.