Correlation Between Dingdong ADR and Companhia Brasileira

Can any of the company-specific risk be diversified away by investing in both Dingdong ADR and Companhia Brasileira 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 Dingdong ADR and Companhia Brasileira into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dingdong ADR and Companhia Brasileira De, you can compare the effects of market volatilities on Dingdong ADR and Companhia Brasileira 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 Dingdong ADR with a short position of Companhia Brasileira. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dingdong ADR and Companhia Brasileira.

Diversification Opportunities for Dingdong ADR and Companhia Brasileira

-0.82

Correlation Coefficient

Dingdong ADR  Companhia Brasileira

Pay attention - limited upside

The 3 months correlation between Dingdong and Companhia is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dingdong ADR and Companhia Brasileira De in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Brasileira and Dingdong ADR 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 Dingdong ADR are associated (or correlated) with Companhia Brasileira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Brasileira has no effect on the direction of Dingdong ADR i.e., Dingdong ADR and Companhia Brasileira go up and down completely randomly.

Pair Corralation between Dingdong ADR and Companhia Brasileira

If you would invest  154.00  in Dingdong ADR on March 7, 2024 and sell it today you would earn a total of  65.00  from holding Dingdong ADR or generate 42.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	0.0%
Values	Daily Returns

Dingdong ADR  vs.  Companhia Brasileira De

Dingdong ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dingdong ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Dingdong ADR disclosed solid returns over the last few months and may actually be approaching a breakup point.

Companhia Brasileira

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Brasileira De 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 fundamental drivers remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Dingdong ADR and Companhia Brasileira

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

The idea behind Dingdong ADR and Companhia Brasileira De 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.