Correlation Between Neto ME and Castro

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

By analyzing existing cross correlation between Neto ME Holdings and Castro, you can compare the effects of market volatilities on Neto ME and Castro 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 Neto ME with a short position of Castro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neto ME and Castro.

Diversification Opportunities for Neto ME and Castro

-0.15

Correlation Coefficient

Neto ME  Castro

Good diversification

The 3 months correlation between Neto and Castro is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Neto ME Holdings and Castro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castro and Neto ME 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 Neto ME Holdings are associated (or correlated) with Castro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castro has no effect on the direction of Neto ME i.e., Neto ME and Castro go up and down completely randomly.

Pair Corralation between Neto ME and Castro

Assuming the 90 days trading horizon Neto ME Holdings is expected to generate 1.0 times more return on investment than Castro. However, Neto ME is 1.0 times more volatile than Castro. It trades about 0.2 of its potential returns per unit of risk. Castro is currently generating about -0.11 per unit of risk. If you would invest  1,679,000  in Neto ME Holdings on April 24, 2025 and sell it today you would earn a total of  371,000  from holding Neto ME Holdings or generate 22.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.96%
Values	Daily Returns

Neto ME Holdings  vs.  Castro

Neto ME Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Neto ME Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Neto ME sustained solid returns over the last few months and may actually be approaching a breakup point.

Castro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Castro has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Neto ME and Castro

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

The idea behind Neto ME Holdings and Castro 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.