Correlation Between Santos Brasil and B3 SA

Can any of the company-specific risk be diversified away by investing in both Santos Brasil and B3 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 Santos Brasil and B3 SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Santos Brasil Participaes and B3 SA , you can compare the effects of market volatilities on Santos Brasil and B3 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 Santos Brasil with a short position of B3 SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Santos Brasil and B3 SA.

Diversification Opportunities for Santos Brasil and B3 SA

-0.32

Correlation Coefficient

Santos Brasil  B3 SA

Very good diversification

The 3 months correlation between Santos and B3SA3 is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Santos Brasil Participaes and B3 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B3 SA and Santos Brasil 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 Santos Brasil Participaes are associated (or correlated) with B3 SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B3 SA has no effect on the direction of Santos Brasil i.e., Santos Brasil and B3 SA go up and down completely randomly.

Pair Corralation between Santos Brasil and B3 SA

Assuming the 90 days trading horizon Santos Brasil Participaes is expected to under-perform the B3 SA. In addition to that, Santos Brasil is 1.59 times more volatile than B3 SA . It trades about -0.09 of its total potential returns per unit of risk. B3 SA is currently generating about -0.05 per unit of volatility. If you would invest  1,094  in B3 SA on March 11, 2024 and sell it today you would lose (19.00) from holding B3 SA or give up 1.74% of portfolio value over 90 days.

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

Santos Brasil Participaes  vs.  B3 SA

Santos Brasil Participaes

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Santos Brasil Participaes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Santos Brasil may actually be approaching a critical reversion point that can send shares even higher in July 2024.

B3 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days B3 SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Santos Brasil and B3 SA

The main advantage of trading using opposite Santos Brasil and B3 SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Santos Brasil position performs unexpectedly, B3 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 B3 SA will offset losses from the drop in B3 SA's long position.

The idea behind Santos Brasil Participaes and B3 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.