Correlation Between TOTVS SA and Gol Linhas

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

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

Diversification Opportunities for TOTVS SA and Gol Linhas

0.09

Correlation Coefficient

TOTVS SA  Gol Linhas

Significant diversification

The 3 months correlation between TOTVS and Gol is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding TOTVS SA and Gol Linhas Areas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gol Linhas Areas and TOTVS SA 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 TOTVS SA are associated (or correlated) with Gol Linhas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gol Linhas Areas has no effect on the direction of TOTVS SA i.e., TOTVS SA and Gol Linhas go up and down completely randomly.

Pair Corralation between TOTVS SA and Gol Linhas

Assuming the 90 days trading horizon TOTVS SA is expected to under-perform the Gol Linhas. But the stock apears to be less risky and, when comparing its historical volatility, TOTVS SA is 1.72 times less risky than Gol Linhas. The stock trades about -0.03 of its potential returns per unit of risk. The Gol Linhas Areas is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  106.00  in Gol Linhas Areas on September 2, 2024 and sell it today you would earn a total of  28.00  from holding Gol Linhas Areas or generate 26.42% return on investment over 90 days.

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

TOTVS SA  vs.  Gol Linhas Areas

TOTVS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOTVS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TOTVS SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Gol Linhas Areas

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gol Linhas Areas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gol Linhas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TOTVS SA and Gol Linhas

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

The idea behind TOTVS SA and Gol Linhas Areas 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.