Correlation Between HEDGE Brasil and Equinix

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

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

Diversification Opportunities for HEDGE Brasil and Equinix

-0.8

Correlation Coefficient

HEDGE Brasil  Equinix

Pay attention - limited upside

The 3 months correlation between HEDGE and Equinix is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding HEDGE Brasil Shopping and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix and HEDGE Brasil 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 HEDGE Brasil Shopping are associated (or correlated) with Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of HEDGE Brasil i.e., HEDGE Brasil and Equinix go up and down completely randomly.

Pair Corralation between HEDGE Brasil and Equinix

Assuming the 90 days trading horizon HEDGE Brasil Shopping is expected to under-perform the Equinix. But the fund apears to be less risky and, when comparing its historical volatility, HEDGE Brasil Shopping is 1.79 times less risky than Equinix. The fund trades about -0.11 of its potential returns per unit of risk. The Equinix is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,970  in Equinix on September 27, 2024 and sell it today you would earn a total of  1,317  from holding Equinix or generate 22.06% return on investment over 90 days.

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

HEDGE Brasil Shopping  vs.  Equinix

HEDGE Brasil Shopping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEDGE Brasil Shopping has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Equinix

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Equinix sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HEDGE Brasil and Equinix

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

The idea behind HEDGE Brasil Shopping and Equinix 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.