Correlation Between Parque Dom and Companhia Brasileira

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

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

Diversification Opportunities for Parque Dom and Companhia Brasileira

-0.77

Correlation Coefficient

Parque Dom  Companhia Brasileira

Pay attention - limited upside

The 3 months correlation between Parque and Companhia is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Parque Dom Pedro and Companhia Brasileira de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Brasileira and Parque Dom 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 Parque Dom Pedro 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 Parque Dom i.e., Parque Dom and Companhia Brasileira go up and down completely randomly.

Pair Corralation between Parque Dom and Companhia Brasileira

Assuming the 90 days trading horizon Parque Dom Pedro is expected to generate 0.26 times more return on investment than Companhia Brasileira. However, Parque Dom Pedro is 3.78 times less risky than Companhia Brasileira. It trades about 0.1 of its potential returns per unit of risk. Companhia Brasileira de is currently generating about -0.03 per unit of risk. If you would invest  190,601  in Parque Dom Pedro on February 7, 2024 and sell it today you would earn a total of  13,399  from holding Parque Dom Pedro or generate 7.03% return on investment over 90 days.

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

Parque Dom Pedro  vs.  Companhia Brasileira de

Parque Dom Pedro

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parque Dom Pedro are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Parque Dom may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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 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 Parque Dom and Companhia Brasileira

The main advantage of trading using opposite Parque Dom and Companhia Brasileira positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parque Dom 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 Parque Dom Pedro 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.