Correlation Between MAHLE Metal and BB Seguridade

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

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

Diversification Opportunities for MAHLE Metal and BB Seguridade

0.7

Correlation Coefficient

MAHLE Metal  BB Seguridade

Poor diversification

The 3 months correlation between MAHLE and BBSE3 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding MAHLE Metal Leve and BB Seguridade Participacoes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Seguridade Partic and MAHLE Metal 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 MAHLE Metal Leve are associated (or correlated) with BB Seguridade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Seguridade Partic has no effect on the direction of MAHLE Metal i.e., MAHLE Metal and BB Seguridade go up and down completely randomly.

Pair Corralation between MAHLE Metal and BB Seguridade

Assuming the 90 days trading horizon MAHLE Metal Leve is expected to under-perform the BB Seguridade. In addition to that, MAHLE Metal is 1.5 times more volatile than BB Seguridade Participacoes. It trades about -0.18 of its total potential returns per unit of risk. BB Seguridade Participacoes is currently generating about -0.17 per unit of volatility. If you would invest  3,671  in BB Seguridade Participacoes on August 31, 2024 and sell it today you would lose (318.00) from holding BB Seguridade Participacoes or give up 8.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

MAHLE Metal Leve  vs.  BB Seguridade Participacoes

MAHLE Metal Leve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAHLE Metal Leve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

BB Seguridade Partic

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with MAHLE Metal and BB Seguridade

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

The idea behind MAHLE Metal Leve and BB Seguridade Participacoes 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.