Correlation Between Seche Environnem and Aurea SA

Can any of the company-specific risk be diversified away by investing in both Seche Environnem and Aurea SA 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 Seche Environnem and Aurea SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Seche Environnem and Aurea SA

0.13

Correlation Coefficient

Seche Environnem  Aurea SA

Average diversification

The 3 months correlation between Seche and Aurea is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Seche Environnem and Aurea SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurea SA and Seche Environnem 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 Seche Environnem are associated (or correlated) with Aurea SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurea SA has no effect on the direction of Seche Environnem i.e., Seche Environnem and Aurea SA go up and down completely randomly.

Pair Corralation between Seche Environnem and Aurea SA

Assuming the 90 days trading horizon Seche Environnem is expected to under-perform the Aurea SA. But the stock apears to be less risky and, when comparing its historical volatility, Seche Environnem is 1.94 times less risky than Aurea SA. The stock trades about -0.17 of its potential returns per unit of risk. The Aurea SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  522.00  in Aurea SA on September 14, 2024 and sell it today you would earn a total of  38.00  from holding Aurea SA or generate 7.28% return on investment over 90 days.

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

Seche Environnem  vs.  Aurea SA

Seche Environnem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seche Environnem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Aurea SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aurea SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aurea SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Seche Environnem and Aurea SA

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

The idea behind Seche Environnem and Aurea 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.