Correlation Between Companhia Siderrgica and GAEC Educacao

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

By analyzing existing cross correlation between Companhia Siderrgica Nacional and GAEC Educacao SA, you can compare the effects of market volatilities on Companhia Siderrgica and GAEC Educacao 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 Companhia Siderrgica with a short position of GAEC Educacao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Siderrgica and GAEC Educacao.

Diversification Opportunities for Companhia Siderrgica and GAEC Educacao

-0.51

Correlation Coefficient

Companhia Siderrgica  GAEC Educacao

Excellent diversification

The 3 months correlation between Companhia and GAEC is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderrgica Nacional and GAEC Educacao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAEC Educacao SA and Companhia Siderrgica 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 Companhia Siderrgica Nacional are associated (or correlated) with GAEC Educacao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAEC Educacao SA has no effect on the direction of Companhia Siderrgica i.e., Companhia Siderrgica and GAEC Educacao go up and down completely randomly.

Pair Corralation between Companhia Siderrgica and GAEC Educacao

Assuming the 90 days trading horizon Companhia Siderrgica Nacional is expected to under-perform the GAEC Educacao. But the stock apears to be less risky and, when comparing its historical volatility, Companhia Siderrgica Nacional is 1.56 times less risky than GAEC Educacao. The stock trades about -0.07 of its potential returns per unit of risk. The GAEC Educacao SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  304.00  in GAEC Educacao SA on April 23, 2025 and sell it today you would earn a total of  57.00  from holding GAEC Educacao SA or generate 18.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Companhia Siderrgica Nacional  vs.  GAEC Educacao SA

Companhia Siderrgica

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia Siderrgica Nacional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

GAEC Educacao SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GAEC Educacao SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GAEC Educacao unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Companhia Siderrgica and GAEC Educacao

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

The idea behind Companhia Siderrgica Nacional and GAEC Educacao 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.