Correlation Between SPDR SP and BRASIL ON

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both SPDR SP and BRASIL ON 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 SPDR SP and BRASIL ON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and BRASIL ON NM, you can compare the effects of market volatilities on SPDR SP and BRASIL ON 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 SPDR SP with a short position of BRASIL ON. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and BRASIL ON.

Diversification Opportunities for SPDR SP and BRASIL ON

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between SPDR SP and BRASIL is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and BRASIL ON NM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRASIL ON NM and SPDR SP 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 SPDR SP 500 are associated (or correlated) with BRASIL ON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRASIL ON NM has no effect on the direction of SPDR SP i.e., SPDR SP and BRASIL ON go up and down completely randomly.

Pair Corralation between SPDR SP and BRASIL ON

Given the investment horizon of 90 days SPDR SP is expected to generate 6.88 times less return on investment than BRASIL ON. But when comparing it to its historical volatility, SPDR SP 500 is 1.41 times less risky than BRASIL ON. It trades about 0.01 of its potential returns per unit of risk. BRASIL ON NM is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,749  in BRASIL ON NM on July 8, 2022 and sell it today you would earn a total of  1,237  from holding BRASIL ON NM or generate 45.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.59%
ValuesDaily Returns

SPDR SP 500  vs.  BRASIL ON NM

 Performance (%) 
       Timeline  
SPDR SP 500 
SPDR SP Performance
0 of 100
Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR SP Price Channel

BRASIL ON NM 
BRASIL Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in BRASIL ON NM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, BRASIL ON reported solid returns over the last few months and may actually be approaching a breakup point.

BRASIL Price Channel

SPDR SP and BRASIL ON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SPDR SP and BRASIL ON

The main advantage of trading using opposite SPDR SP and BRASIL ON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, BRASIL ON 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 BRASIL ON will offset losses from the drop in BRASIL ON's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against SPDR SP as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. SPDR SP's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, SPDR SP's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to SPDR SP 500.
The idea behind SPDR SP 500 and BRASIL ON NM 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.
BRASIL ON vs. PAYPAL HOLD DRN
BRASIL ON vs. ITAUUNIBANCOPN N1
BRASIL ON vs. HAPVIDA ON NM
BRASIL ON vs. PORTO SEGUROON NM
Check out your portfolio center. 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

Other Complementary Tools

Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Go
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Go
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Go
Watchlist Optimization
Optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm
Go