Correlation Between Fundo De and Iochpe Maxion

Can any of the company-specific risk be diversified away by investing in both Fundo De and Iochpe Maxion 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 Iochpe Maxion 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 Iochpe Maxion SA, you can compare the effects of market volatilities on Fundo De and Iochpe Maxion 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 Iochpe Maxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundo De and Iochpe Maxion.

Diversification Opportunities for Fundo De and Iochpe Maxion

-0.61

Correlation Coefficient

Fundo De  Iochpe Maxion

Excellent diversification

The 3 months correlation between Fundo and Iochpe is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fundo De Investimento and Iochpe Maxion SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iochpe Maxion SA 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 Iochpe Maxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iochpe Maxion SA has no effect on the direction of Fundo De i.e., Fundo De and Iochpe Maxion go up and down completely randomly.

Pair Corralation between Fundo De and Iochpe Maxion

Assuming the 90 days trading horizon Fundo De Investimento is expected to under-perform the Iochpe Maxion. But the etf apears to be less risky and, when comparing its historical volatility, Fundo De Investimento is 1.4 times less risky than Iochpe Maxion. The etf trades about -0.15 of its potential returns per unit of risk. The Iochpe Maxion SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,109  in Iochpe Maxion SA on September 3, 2024 and sell it today you would earn a total of  64.00  from holding Iochpe Maxion SA or generate 5.77% return on investment over 90 days.

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

Fundo De Investimento  vs.  Iochpe Maxion SA

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 investors with long positions. Despite weak performance in the last few months, the Etf's basic 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 ETF investors.

Iochpe Maxion SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iochpe Maxion SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Iochpe Maxion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fundo De and Iochpe Maxion

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

The idea behind Fundo De Investimento and Iochpe Maxion SA 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.