Correlation Between Magazine Luiza and Best Buy

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

By analyzing existing cross correlation between Magazine Luiza SA and Best Buy Co, you can compare the effects of market volatilities on Magazine Luiza and Best Buy 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 Magazine Luiza with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magazine Luiza and Best Buy.

Diversification Opportunities for Magazine Luiza and Best Buy

-0.19

Correlation Coefficient

Magazine Luiza  Best Buy

Good diversification

The 3 months correlation between Magazine and Best is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza SA and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Magazine Luiza 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 Magazine Luiza SA are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Magazine Luiza i.e., Magazine Luiza and Best Buy go up and down completely randomly.

Pair Corralation between Magazine Luiza and Best Buy

Assuming the 90 days trading horizon Magazine Luiza SA is expected to under-perform the Best Buy. In addition to that, Magazine Luiza is 1.75 times more volatile than Best Buy Co. It trades about -0.08 of its total potential returns per unit of risk. Best Buy Co is currently generating about 0.05 per unit of volatility. If you would invest  36,684  in Best Buy Co on April 20, 2025 and sell it today you would earn a total of  2,115  from holding Best Buy Co or generate 5.77% return on investment over 90 days.

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

Magazine Luiza SA  vs.  Best Buy Co

Magazine Luiza SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magazine Luiza 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 August 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Best Buy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Best Buy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Magazine Luiza and Best Buy

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

The idea behind Magazine Luiza SA and Best Buy Co 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.