Correlation Between BB Seguridade and Waterdrop ADR

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

By analyzing existing cross correlation between BB Seguridade Participacoes and Waterdrop ADR, you can compare the effects of market volatilities on BB Seguridade and Waterdrop ADR 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 BB Seguridade with a short position of Waterdrop ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of BB Seguridade and Waterdrop ADR.

Diversification Opportunities for BB Seguridade and Waterdrop ADR

-0.62

Correlation Coefficient

BB Seguridade  Waterdrop ADR

Excellent diversification

The 3 months correlation between BBSEY and Waterdrop is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding BB Seguridade Participacoes and Waterdrop ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterdrop ADR and BB Seguridade 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 BB Seguridade Participacoes are associated (or correlated) with Waterdrop ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waterdrop ADR has no effect on the direction of BB Seguridade i.e., BB Seguridade and Waterdrop ADR go up and down completely randomly.

Pair Corralation between BB Seguridade and Waterdrop ADR

Assuming the 90 days horizon BB Seguridade is expected to generate 2.1 times less return on investment than Waterdrop ADR. But when comparing it to its historical volatility, BB Seguridade Participacoes is 2.12 times less risky than Waterdrop ADR. It trades about 0.02 of its potential returns per unit of risk. Waterdrop ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  162.00  in Waterdrop ADR on April 30, 2025 and sell it today you would earn a total of  15.00  from holding Waterdrop ADR or generate 9.26% return on investment over 90 days.

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

BB Seguridade Participacoes  vs.  Waterdrop ADR

BB Seguridade Partic

Risk-Adjusted Performance

Very Weak

Over the last 90 days BB Seguridade Participacoes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly 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.

Waterdrop ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waterdrop ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Waterdrop ADR demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BB Seguridade and Waterdrop ADR

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

The idea behind BB Seguridade Participacoes and Waterdrop ADR 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.