Correlation Between GAEC Educacao and Ser Educacional

Can any of the company-specific risk be diversified away by investing in both GAEC Educacao and Ser Educacional 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 GAEC Educacao and Ser Educacional into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for GAEC Educacao and Ser Educacional

0.78

Correlation Coefficient

GAEC Educacao  Ser Educacional

Poor diversification

The 3 months correlation between GAEC and Ser is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding GAEC Educacao SA and Ser Educacional Sa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ser Educacional Sa and GAEC Educacao 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 GAEC Educacao SA are associated (or correlated) with Ser Educacional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ser Educacional Sa has no effect on the direction of GAEC Educacao i.e., GAEC Educacao and Ser Educacional go up and down completely randomly.

Pair Corralation between GAEC Educacao and Ser Educacional

Assuming the 90 days trading horizon GAEC Educacao SA is expected to under-perform the Ser Educacional. But the stock apears to be less risky and, when comparing its historical volatility, GAEC Educacao SA is 1.22 times less risky than Ser Educacional. The stock trades about -0.42 of its potential returns per unit of risk. The Ser Educacional Sa is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  686.00  in Ser Educacional Sa on February 1, 2024 and sell it today you would lose (134.00) from holding Ser Educacional Sa or give up 19.53% of portfolio value over 90 days.

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

GAEC Educacao SA  vs.  Ser Educacional Sa

GAEC Educacao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAEC Educacao SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ser Educacional Sa

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GAEC Educacao and Ser Educacional

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

The idea behind GAEC Educacao SA and Ser Educacional 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.