Correlation Between Fundo De and S1YM34

Can any of the company-specific risk be diversified away by investing in both Fundo De and S1YM34 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 Fundo De and S1YM34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fundo de Investimento and S1YM34, you can compare the effects of market volatilities on Fundo De and S1YM34 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 Fundo De with a short position of S1YM34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundo De and S1YM34.

Diversification Opportunities for Fundo De and S1YM34

-0.81

Correlation Coefficient

Fundo De  S1YM34

Pay attention - limited upside

The 3 months correlation between Fundo and S1YM34 is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fundo de Investimento and S1YM34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S1YM34 and Fundo De 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 Fundo de Investimento are associated (or correlated) with S1YM34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S1YM34 has no effect on the direction of Fundo De i.e., Fundo De and S1YM34 go up and down completely randomly.

Pair Corralation between Fundo De and S1YM34

Assuming the 90 days trading horizon Fundo de Investimento is expected to under-perform the S1YM34. But the fund apears to be less risky and, when comparing its historical volatility, Fundo de Investimento is 3.21 times less risky than S1YM34. The fund trades about -0.22 of its potential returns per unit of risk. The S1YM34 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  13,472  in S1YM34 on September 25, 2024 and sell it today you would earn a total of  4,421  from holding S1YM34 or generate 32.82% return on investment over 90 days.

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

Fundo de Investimento  vs.  S1YM34

Fundo de Investimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundo de Investimento has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

S1YM34

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in S1YM34 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, S1YM34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fundo De and S1YM34

The main advantage of trading using opposite Fundo De and S1YM34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundo De position performs unexpectedly, S1YM34 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 S1YM34 will offset losses from the drop in S1YM34's long position.

The idea behind Fundo de Investimento and S1YM34 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.