Correlation Between Amazonas Florestal and MPX International

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

By analyzing existing cross correlation between Amazonas Florestal and MPX International Corp, you can compare the effects of market volatilities on Amazonas Florestal and MPX International 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 Amazonas Florestal with a short position of MPX International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazonas Florestal and MPX International.

Diversification Opportunities for Amazonas Florestal and MPX International

0.07

Correlation Coefficient

Amazonas Florestal  MPX International

Significant diversification

The 3 months correlation between Amazonas and MPX is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Amazonas Florestal and MPX International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPX International Corp and Amazonas Florestal 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 Amazonas Florestal are associated (or correlated) with MPX International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPX International Corp has no effect on the direction of Amazonas Florestal i.e., Amazonas Florestal and MPX International go up and down completely randomly.

Pair Corralation between Amazonas Florestal and MPX International

Given the investment horizon of 90 days Amazonas Florestal is expected to generate 2.03 times more return on investment than MPX International. However, Amazonas Florestal is 2.03 times more volatile than MPX International Corp. It trades about 0.26 of its potential returns per unit of risk. MPX International Corp is currently generating about 0.28 per unit of risk. If you would invest  0.01  in Amazonas Florestal on September 19, 2024 and sell it today you would lose (0.01) from holding Amazonas Florestal or give up 100.0% of portfolio value over 90 days.

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

Amazonas Florestal  vs.  MPX International Corp

Amazonas Florestal

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazonas Florestal are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Amazonas Florestal disclosed solid returns over the last few months and may actually be approaching a breakup point.

MPX International Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MPX International Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MPX International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amazonas Florestal and MPX International

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

The idea behind Amazonas Florestal and MPX International Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.