Correlation Between IRB Brasil and GAEC Educacao

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

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

Diversification Opportunities for IRB Brasil and GAEC Educacao

0.17

Correlation Coefficient

IRB Brasil  GAEC Educacao

Average diversification

The 3 months correlation between IRB and GAEC is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding IRB Brasil Resseguros SA 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 IRB 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 IRB Brasil Resseguros SA 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 IRB Brasil i.e., IRB Brasil and GAEC Educacao go up and down completely randomly.

Pair Corralation between IRB Brasil and GAEC Educacao

Assuming the 90 days trading horizon IRB Brasil Resseguros SA is expected to under-perform the GAEC Educacao. But the stock apears to be less risky and, when comparing its historical volatility, IRB Brasil Resseguros SA is 1.86 times less risky than GAEC Educacao. The stock trades about -0.02 of its potential returns per unit of risk. The GAEC Educacao SA is currently generating about 0.08 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  52.00  from holding GAEC Educacao SA or generate 17.11% return on investment over 90 days.

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

IRB Brasil Resseguros SA  vs.  GAEC Educacao SA

IRB Brasil Resseguros

Risk-Adjusted Performance

Very Weak

Over the last 90 days IRB Brasil Resseguros SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IRB Brasil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the 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 IRB Brasil and GAEC Educacao

The main advantage of trading using opposite IRB Brasil and GAEC Educacao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IRB Brasil 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 IRB Brasil Resseguros SA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.