Correlation Between Cruzeiro and Sea

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

By analyzing existing cross correlation between Cruzeiro do Sul and Sea Limited, you can compare the effects of market volatilities on Cruzeiro and Sea 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 Cruzeiro with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cruzeiro and Sea.

Diversification Opportunities for Cruzeiro and Sea

0.68

Correlation Coefficient

Cruzeiro  Sea

Poor diversification

The 3 months correlation between Cruzeiro and Sea is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cruzeiro do Sul and Sea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Limited and Cruzeiro 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 Cruzeiro do Sul are associated (or correlated) with Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Limited has no effect on the direction of Cruzeiro i.e., Cruzeiro and Sea go up and down completely randomly.

Pair Corralation between Cruzeiro and Sea

Assuming the 90 days trading horizon Cruzeiro do Sul is expected to generate 0.75 times more return on investment than Sea. However, Cruzeiro do Sul is 1.34 times less risky than Sea. It trades about 0.2 of its potential returns per unit of risk. Sea Limited is currently generating about 0.1 per unit of risk. If you would invest  377.00  in Cruzeiro do Sul on April 25, 2025 and sell it today you would earn a total of  115.00  from holding Cruzeiro do Sul or generate 30.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Cruzeiro do Sul  vs.  Sea Limited

Cruzeiro do Sul

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cruzeiro do Sul are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cruzeiro unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sea Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Sea sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cruzeiro and Sea

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

The idea behind Cruzeiro do Sul and Sea Limited 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.

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 the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.